Sales wouldn't be higher just because prices were up, would they? And is it not also the case that this November had more shopping days counted in it than the comparison month (or something like that)? Final observation - Bernanke should clearly not have cut at all, not even 25 bps.
From the AP article: Half of the November increase came from a big jump in gasoline pump prices and therefore was not seen as a sign of strength in consumer demand.
Auto sales were the only area of weakness in November.
If you were looking for the effect on retail sales from the fall in MEW, auto sales is exactly what you'd expect to be hit first.
I can think of some other areas that might suffer. For instance, colleges have been increasing tuition at 3-4 times the rate of inflation over the last few years and it seems a good bet MEW was used to mitigate some of that. I'm very conservative financially, but if I had a kid accepted to a good school, and visit to the MEW station was the only way to swing it, I wouldn't hesitate. This area is conseidered somewhat recession-proof because there are four colleges and a state university...
Dec. 13 (Bloomberg) -- U.S. retail sales dropped for the second straight week as consumers postponed holiday gift purchases during what may be the worst holiday shopping season in five years.
Sales fell 2.7 percent in the seven days through Dec. 8, following a 4.4 percent decline a week earlier, Chicago-based research firm ShopperTrak RCT Corp. said yesterday. About 12 percent fewer shoppers visited stores last week compared with the same period last year, ShopperTrak said.
[snip]
(If that doesn't violate anyone's cut n paste sensibilities)
Adjust that for inflation and number of shopping days in the month and it isn't really amazing growth.
The credit cards are being charged up so we wont see the contraction in retail sales until after credit card DQs rise and the consumer can't use their cards anymore. We know the American consumer wont stop spending until they can't get credit.
energyecon, I think sales would have been up strongly if gas prices had not spiked. The US consumer has one rule; "In one pocket, out the other".
I marvel at how we can spend and eat.
I love this first sentence and then all the evidence that follows that contradicts it.
The stronger-than-expected gain in retail sales should ease worries that the country could be in danger of tumbling into a full-blown recession. However, analysts cautioned that the November sales figure was inflated by heavy discounting in the week following Thanksgiving. Sales data in early December reflect weaker activity, they said.
"December will be hard work for retailers in the wake of the plunge in consumer confidence," said Ian Shepherdson, chief U.S. economist at High Frequency Economics.
Half of the November increase in retail sales came from a big jump in gasoline pump prices and therefore was not seen as a sign of strength in consumer demand. But there were widespread gains across a number of other areas from department stores to appliance and furniture stores.
R. Timm: Absolutely, the consumer spending will stay strong until consumers hit their credit limit, at which point spending will fall off a cliff. Exactly what we saw with housing: strong performance until the credit ran out, at which point the market collapsed.
just out of interest. Countrywide seems to me an important part of any plan to provide methods of keeping the housing bubble inflated. And if inflation remains high and the dollar devalues then sooner or later the million dollar houses will be worth the million dollar mortgage.
Worried - we need would to see several years of wage and price inflation for the housing bubble to be resolved that way. Right now we are only getting price inflation in food, energy, and some services.
CFC will probably go bust long before they can be part of a "solution".
Wage inflation will not happen. Not now, not ever.
We'd have to lower our standards of living to those in the backwoods of China to compete in that regard. Do you like eating food? Living under a non-leaking roof? Not breathing in filthy smog or drinking water full of industrial waste? If you're attached to those concepts, then forget competing with China or any other nation that undercuts us in wages by basically using slave labor. Then, there's the problem of the illegals taking our jobs as well.
No, wages will not be rising. Companies can't stand the idea of employees earning enough money to not live as debt-serfs, we can't compete with slave labor, and the Fed considers wage inflation the only "real" inflation to prevent.
So, without wage inflation and without more toxic loans, we have only 2 paths: 1) Socialized housing, which will lead to dollar collapse and all sorts of problems 2) Much lower housing prices based on actual incomes. The price drop will create some problems, but the long-term benefits of this plan (especially for the middle class) as opposed to socialized housing are obvious... which is why those in power will try to socialize housing.
I'm very conservative financially, but if I had a kid accepted to a good school, and visit to the MEW station was the only way to swing it, I wouldn't hesitate.
Indeed, that's the ONLY way to do it for most people, Bob.
Yep, stagflation it is. I know the arguments for deflation are compelling but I would not be surprised to see some stagflation first while money is being dropped from helicopters around the world. UK has an inflation problem too. And of course European central bank refused to cut rates last time because of inflation there. And then there is China's inflation...
Then a grinding deflationary depression. We will need to name it. Here are my nominations:
(1) The Greenspan Depression - after the man actually responsible. This won't get chosen because too much time will pass between him and the event.
(2) The Clinton Bush Depression - after the two administrations ultimately responsible for running the country then. The negative association would have the added benefit of ensuring neither family was ever in office again.
(3) The Bernanke Depression - how deliciously ironic.
Oh and by the way, Asia and Europe not impressed at all with yesterday's shock and awe. Oh, and LIBOR is still at a 7 year high. I sure hope they have a Plan B.
Wage inflation will not happen. Not now, not ever.
While I tend to agree, I would qualify that slightly.
Wage inflation will not happen here.
Wage inflation is happening in China though, as if the money we're sending them somehow doesn't count towards our inflation eventually. China's consuming nearly 10% of the world's total oil these days as just one "minor" example of how it's not affecting us (some sarcasm added, not directed at you though, just at the situation).
Helicopter Ben's Hyperinflation would be similarly deliciously ironic in my opinion.
I'd no doubt lose my life savings in the process (as a paper stagflationist), but at least I'd get some seriously good heckling in.
Oh what a tightrope he needs to walk. Personally, I hope he manages to stay perfectly balanced for many, many years. I'm even willing to hold my breath if it would help. For the love of all that's holy, no sidewinds!!
This is a global economy now. If we ship foreigners enough money eventually they're going to spend it just like we would (and on the things we would, like oil).
If we shipped China fifty billion $20 bills in the morning but our wages stayed flat would we or would we not have a long-term inflation problem?
That's how much they've got and we continue to send them another billion $20 bills each and every month (and a billion $5 bills as well).
If we shipped China fifty billion $20 bills in the morning but our wages stayed flat would we or would we not have a long-term inflation problem?
The root of the "long-term inflation problem" is all those trillions in gub'mint IOU's, aka Treasuries, that we've printed over the four decades of continuing inability to balance our budget and current account ledgers.
Whether a specific $1T worth of Treasuries is being held by China, or Dubai, or Ma and Pa Kettle makes to difference - any way you slice it, we have to come up with $40B every year to pay the interest and a further $1T in 10-30 years' time to make good on the loan itself.
And how do you suppose they're going to be inclined to do that? "Fire up them printin' presses, boys!" And voila - too much money chasing too few goods.
Wage inflation will not happen. Not now, not ever.
I would like to add the word "real" ahead of "inflation". I am old enough to remember the joy of 8-10% raises every 18 months against the backdrop of 12-14% annual inflation. After 7-8 years my salary was much higher but my buying power was down 25% (adjusting social security wage history by CPI which was more valid at the time). I never recovered from the lost wages - even today, pension and social security payments are lower than they would have been if salary had kept up with inflation. Many compensated by taking a second job or having wives go to work. Personally I was frozen in my lifestyle of the time and still live in the house I bought in 1975 with a 30 year fixed rate of 8.9%.
My current take is that the middle and working classes are already in recession. The upper class is doing great with bonus pools and tax cuts which is why Kudlow is so positive - his folks are doing fine.
I am seeing deflation in financial assets which is a US credit bubble bust story but inflation in real assets which is a BRIC growth story. I will consider housing a financial asset until prices rationalize since prices were set by the monthly payment and not the value of the house as a collection of comodities piled on a piece of land.
As suggested above, increases at the pump are a negative drag:
The biggest gainers among retailers were gas stations (+6.8%), clothing (+2.6%), electronics (+2.5%), and sporting goods (+2.2%). Gas station sales were more a function of prices at the pump and Thanksgiving holiday travel than robust consumer activity, and the other three categories saw heavy discounting as the shopping season began.
I read on another blog that the standard deviation for the retail sales numbers is 0.7%. If true, there is essentially no "information" in the "excluding gasoline" report.
Is the standard deviation reported by the Census Bureau?
From what I've seen at the local mall, fair number of cars but when you look at the folks, they're pretty much empty-handed when they go to the cars. Black Friday AM was - as always - spectacular to watch but only because the retailers were advertising major sales on select items for which they had very limited supplies. Gave me a chance to explain "bait and switch" to my daughter.
Does this mean we are going to have positive GDP growth figures again due to rising sales numbers from rising gas prices and then excluding rising gasoline prices from the core inflation adjustment?
Do they adjust these for selling days in the month to month comparisons?
Sales wouldn't be higher just because prices were up, would they? And is it not also the case that this November had more shopping days counted in it than the comparison month (or something like that)? Final observation - Bernanke should clearly not have cut at all, not even 25 bps.
maybe the long bond starting to get the idea. 7% inflation.
From the AP article:
Half of the November increase came from a big jump in gasoline pump prices and therefore was not seen as a sign of strength in consumer demand.
Auto sales were the only area of weakness in November.
If you were looking for the effect on retail sales from the fall in MEW, auto sales is exactly what you'd expect to be hit first.
I can think of some other areas that might suffer. For instance, colleges have been increasing tuition at 3-4 times the rate of inflation over the last few years and it seems a good bet MEW was used to mitigate some of that. I'm very conservative financially, but if I had a kid accepted to a good school, and visit to the MEW station was the only way to swing it, I wouldn't hesitate. This area is conseidered somewhat recession-proof because there are four colleges and a state university...
"Excluding gasoline, retail sales rose 0.6%."
A minor - very minor - point.
And from Bloomberg:
U.S. Holiday Sales Drop for Second Week, Research Group Says
Dec. 13 (Bloomberg) -- U.S. retail sales dropped for the second straight week as consumers postponed holiday gift purchases during what may be the worst holiday shopping season in five years.
Sales fell 2.7 percent in the seven days through Dec. 8, following a 4.4 percent decline a week earlier, Chicago-based research firm ShopperTrak RCT Corp. said yesterday. About 12 percent fewer shoppers visited stores last week compared with the same period last year, ShopperTrak said.
[snip]
(If that doesn't violate anyone's cut n paste sensibilities)
BTW, 52% of the increase was at gasoline stations....
"Excluding gasoline, retail sales rose 0.6%"
Adjust that for inflation and number of shopping days in the month and it isn't really amazing growth.
The credit cards are being charged up so we wont see the contraction in retail sales until after credit card DQs rise and the consumer can't use their cards anymore. We know the American consumer wont stop spending until they can't get credit.
energyecon, I think sales would have been up strongly if gas prices had not spiked. The US consumer has one rule; "In one pocket, out the other".
I marvel at how we can spend and eat.
To what extent is this Canadians and Europeans buying goods over here due to the weak dollar?
And from the report itself: Estimates adjusted for seasonal variations and holiday and trading-day differences, but not for price changes.
This year's must have christmas gift - Gasoline!
I am an idiot, thanks F.Frederson.
Still not great news for manufacturers when input prices are up over 3% and retail sales up in the low 1% range.
sts, I was working in NYC last holiday season and the number was enormous there, mostly UK visitors.
Nationwide I'm not sure.
Whole sale prices up 3.2% in November
Expired
S-T-A-G-F-L-A-T-I-O-N!!!
I love this first sentence and then all the evidence that follows that contradicts it.
The stronger-than-expected gain in retail sales should ease worries that the country could be in danger of tumbling into a full-blown recession. However, analysts cautioned that the November sales figure was inflated by heavy discounting in the week following Thanksgiving. Sales data in early December reflect weaker activity, they said.
"December will be hard work for retailers in the wake of the plunge in consumer confidence," said Ian Shepherdson, chief U.S. economist at High Frequency Economics.
Half of the November increase in retail sales came from a big jump in gasoline pump prices and therefore was not seen as a sign of strength in consumer demand. But there were widespread gains across a number of other areas from department stores to appliance and furniture stores.
CR, I have an ignoramus question: how do producer prices usually relate to retail sales? strong correlation? thanks
This area is conseidered somewhat recession-proof because there are four colleges and a state university... - Bob_in_MA
Ventura County has 3 colleges an 2 universities and home prices are down 50% in sales and 6% in price yoy.
R. Timm: Absolutely, the consumer spending will stay strong until consumers hit their credit limit, at which point spending will fall off a cliff. Exactly what we saw with housing: strong performance until the credit ran out, at which point the market collapsed.
Yal
how u liking FHN now?
Countrywide reports November mortgage funding drops 40%.
Yahoo! 404 - Page Not Found
just out of interest. Countrywide seems to me an important part of any plan to provide methods of keeping the housing bubble inflated. And if inflation remains high and the dollar devalues then sooner or later the million dollar houses will be worth the million dollar mortgage.
And i see that CFC is a primary dealer.
Has any primary dealer actually gone bust?
Fed spin: producer price index ex everything but computers was down 2.4%
Worried - we need would to see several years of wage and price inflation for the housing bubble to be resolved that way. Right now we are only getting price inflation in food, energy, and some services.
CFC will probably go bust long before they can be part of a "solution".
Wage inflation will not happen. Not now, not ever.
We'd have to lower our standards of living to those in the backwoods of China to compete in that regard. Do you like eating food? Living under a non-leaking roof? Not breathing in filthy smog or drinking water full of industrial waste? If you're attached to those concepts, then forget competing with China or any other nation that undercuts us in wages by basically using slave labor. Then, there's the problem of the illegals taking our jobs as well.
No, wages will not be rising. Companies can't stand the idea of employees earning enough money to not live as debt-serfs, we can't compete with slave labor, and the Fed considers wage inflation the only "real" inflation to prevent.
So, without wage inflation and without more toxic loans, we have only 2 paths: 1) Socialized housing, which will lead to dollar collapse and all sorts of problems 2) Much lower housing prices based on actual incomes. The price drop will create some problems, but the long-term benefits of this plan (especially for the middle class) as opposed to socialized housing are obvious... which is why those in power will try to socialize housing.
Note that I didn't stick those fruity hyper-links in my post. Must be some Haloscan advertising thing.
U.S. retail sales rose sharply in November, pushed higher by rising gasoline prices, the Commerce Department reported Thursday.
In a separate report, the Labor Department said producer prices jumped 3.2% in October, the largest since 1973 and the core rate rose 0.4%.
Biting tongue. Cringing. It seems like only yesterday I posted the following.
1973: The Seeds of Stagflation?
For the record, it was yesterday. Go figure.
In other news, I see that the dollars spent eating out as a percentage of food sales continues to stagnate.
Eating Out vs. Eating at Home v.2
Perhaps the retailers should consider moving the grocery stores into the malls. Wouldn't want the strong consumer to miss out.
I'm very conservative financially, but if I had a kid accepted to a good school, and visit to the MEW station was the only way to swing it, I wouldn't hesitate.
Indeed, that's the ONLY way to do it for most people, Bob.
Yep, stagflation it is. I know the arguments for deflation are compelling but I would not be surprised to see some stagflation first while money is being dropped from helicopters around the world. UK has an inflation problem too. And of course European central bank refused to cut rates last time because of inflation there. And then there is China's inflation...
Then a grinding deflationary depression. We will need to name it. Here are my nominations:
(1) The Greenspan Depression - after the man actually responsible. This won't get chosen because too much time will pass between him and the event.
(2) The Clinton Bush Depression - after the two administrations ultimately responsible for running the country then. The negative association would have the added benefit of ensuring neither family was ever in office again.
(3) The Bernanke Depression - how deliciously ironic.
Oh and by the way, Asia and Europe not impressed at all with yesterday's shock and awe. Oh, and LIBOR is still at a 7 year high. I sure hope they have a Plan B.
Pondering the Mess,
Wage inflation will not happen. Not now, not ever.
While I tend to agree, I would qualify that slightly.
Wage inflation will not happen here.
Wage inflation is happening in China though, as if the money we're sending them somehow doesn't count towards our inflation eventually. China's consuming nearly 10% of the world's total oil these days as just one "minor" example of how it's not affecting us (some sarcasm added, not directed at you though, just at the situation).
In a separate report, the Labor Department said producer prices jumped 3.2% in October, the largest since 1973 and the core rate rose 0.4%.
Somebody just said it, but people need to make the key distinction that wages were rising rapidly in the 70s even as people were losing their jobs.
We see a similar situation in developing countries today with steeply rising wages.
But we're not seeing that in the US currently.
Once that happens I'll change my ways and join the inflation camp.
sterlingerl,
The Bernanke Depression - how deliciously ironic.
LOL!
Helicopter Ben's Hyperinflation would be similarly deliciously ironic in my opinion.
I'd no doubt lose my life savings in the process (as a paper stagflationist), but at least I'd get some seriously good heckling in.
Oh what a tightrope he needs to walk. Personally, I hope he manages to stay perfectly balanced for many, many years. I'm even willing to hold my breath if it would help. For the love of all that's holy, no sidewinds!!
If the consensus is correct re the CPI, yearly inflation in NOvember will be 4.4%.
ac,
This is a global economy now. If we ship foreigners enough money eventually they're going to spend it just like we would (and on the things we would, like oil).
If we shipped China fifty billion $20 bills in the morning but our wages stayed flat would we or would we not have a long-term inflation problem?
That's how much they've got and we continue to send them another billion $20 bills each and every month (and a billion $5 bills as well).
If we shipped China fifty billion $20 bills in the morning but our wages stayed flat would we or would we not have a long-term inflation problem?
The root of the "long-term inflation problem" is all those trillions in gub'mint IOU's, aka Treasuries, that we've printed over the four decades of continuing inability to balance our budget and current account ledgers.
Whether a specific $1T worth of Treasuries is being held by China, or Dubai, or Ma and Pa Kettle makes to difference - any way you slice it, we have to come up with $40B every year to pay the interest and a further $1T in 10-30 years' time to make good on the loan itself.
And how do you suppose they're going to be inclined to do that? "Fire up them printin' presses, boys!" And voila - too much money chasing too few goods.
ac,
Somebody just said it, but people need to make the key distinction that wages were rising rapidly in the 70s even as people were losing their jobs.
Real wages (adjusted for inflation) peaked in January 1973 (at $19.83 in today's dollars), well before people started losing their jobs.
Historical Real Hourly Earnings
Wage inflation will not happen. Not now, not ever.
I would like to add the word "real" ahead of "inflation". I am old enough to remember the joy of 8-10% raises every 18 months against the backdrop of 12-14% annual inflation. After 7-8 years my salary was much higher but my buying power was down 25% (adjusting social security wage history by CPI which was more valid at the time). I never recovered from the lost wages - even today, pension and social security payments are lower than they would have been if salary had kept up with inflation. Many compensated by taking a second job or having wives go to work. Personally I was frozen in my lifestyle of the time and still live in the house I bought in 1975 with a 30 year fixed rate of 8.9%.
My current take is that the middle and working classes are already in recession. The upper class is doing great with bonus pools and tax cuts which is why Kudlow is so positive - his folks are doing fine.
I am seeing deflation in financial assets which is a US credit bubble bust story but inflation in real assets which is a BRIC growth story. I will consider housing a financial asset until prices rationalize since prices were set by the monthly payment and not the value of the house as a collection of comodities piled on a piece of land.
Just my thoughts for what they are worth.
As suggested above, increases at the pump are a negative drag:
The biggest gainers among retailers were gas stations (+6.8%), clothing (+2.6%), electronics (+2.5%), and sporting goods (+2.2%). Gas station sales were more a function of prices at the pump and Thanksgiving holiday travel than robust consumer activity, and the other three categories saw heavy discounting as the shopping season began.
I read on another blog that the standard deviation for the retail sales numbers is 0.7%. If true, there is essentially no "information" in the "excluding gasoline" report.
Is the standard deviation reported by the Census Bureau?
Next week will be a huge buying week - we are all hoping retailers are desperate by now. ;^)
From what I've seen at the local mall, fair number of cars but when you look at the folks, they're pretty much empty-handed when they go to the cars. Black Friday AM was - as always - spectacular to watch but only because the retailers were advertising major sales on select items for which they had very limited supplies. Gave me a chance to explain "bait and switch" to my daughter.
Does this mean we are going to have positive GDP growth figures again due to rising sales numbers from rising gas prices and then excluding rising gasoline prices from the core inflation adjustment?