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Retail Bull

The Wall Street media was in a frenzy over the “better than expected” news on retailing from the Commerce Department on Friday. It’s all a matter of  perspective. Yes, the data was up strongly month to month, and yes, it was higher than last November when the economy seized up following the stock market panic, but when you look at the big picture, there isn’t much to get excited about.

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The government and the media always report seasonally adjusted data with no mention of the fact that it is not the actual number. When we look at the actual data, rather than the phonied up seasonally adjusted number, we see that the reported gain of 1.3% is the usual hype. There’s no substance to it. To be fair, we would expect that there’s some seasonal influence between October and November, so let’s look at the previous 10 years change from October to November as a basis of comparison. That should give us some inkling as to whether things are really on the upswing.

This year, there was virtually no change in actual sales from October to November, rising from $344.8 billion to $345 billion, for a gain of 0.05%. In the 10 years prior to this year, the average gain in actual retail sales, not seasonally adjusted, from October to November was 0.75%, with a range of  -3.88% (2008) to +2.44% (2007). In non recession years, the gain was usually between 2% and 2.5%.This year’s performance was worse than all except 2001, 2003, 2004, and 2008. A flat performance is not a disaster, but given the absolute level, neither is it evidence of recovery.

The annual rate of change has gone positive, but only because it is compared to the worst economic performance in generations in November of 2008. It is still well within the declining trend that began in 2006. Until that trend is clearly broken, calling this a recovery is nothing more than a semantic game.

Likewise, the idea that the stock market discounts the economy is disproved by this chart. In 2000, 2003, and 2006-07 the annual rate of change in retail sales has led changes in stock market direction. In 2009,the stock market reversal was a little ahead of retail sales. We have to wonder if the players have been placing their bets based on Wall Street propaganda instead of real facts, just as they did from mid 2006 to mid 2007 in the final blowoff of that bull run.

Finally, below is a chart of  seasonally adjusted real retail sales, adjusted by the CPI, to factor out the effect of inflation. This chart is only through October, since the CPI for November has not been released yet. The seasonally adjusted gain in November will still be within the flat range that began late last year. It’s pretty clear from this chart that during this “recovery” being touted by the Wall Street distribution machine, there has been no unit growth in retail sales. So far,their “recovery” is a sham. Real retail sales remain at a level no better than  7 years ago when there were 20 million fewer people in the US than today.

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Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also publish, and was lead analyst for Sure Money Investor, of blessed memory. I developed David Stockman's Contra Corner for Mr. Stockman. I’ve had a wide variety of finance related jobs since 1972, including a stint on Wall Street in both sales, analytical, and trading capacities. Prior to starting the Wall Street Examiner I was a commercial real estate appraiser in Florida for 15 years. I was considered an expert in the analysis of failed properties that ended up in the hands of bank REO divisions, the FDIC, and the RTC. Remember those guys? I also worked in the residential mortgage and real estate businesses in parts of the 1970s and 80s. I have been charting stocks and markets and doing analytical work since I was a teenager. I'm not some Ivory Tower academic, Wall Street guy. My perspective comes from having my boots on the ground and in the trenches, as a real estate broker, mortgage broker, trader, account rep, and analyst. I've watched most of the games these Wall Street wiseguys play from right up close. I know the drill from my 55 years of paying attention. And I'm happy to share that experience with you, right here. 


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