In Retail Sales Rise
7th Straight Month, Now Above Pre-Recession Peak; Making Sense of the
Numbers; Housing and Auto Perspective I questioned whether retail sales are
really rising and posted some charts of autos, housing, and sales tax data
(the true measure of retail sales).
Housing is not a part of retail sales but housing does affect retail sales
because of appliance sales, carpet, paint, fixtures, landscaping, etc.
This was my conclusion.
Car sales are not up in
number, but they are up in price. The same applies to food, and many other
items. Population is also growing. All of those things need to be factored
into the equation.
Even if one accepts the retail survey is accurate (I don't because it misses
too many small stores that went out of business and are still closed), real
sales have certainly not recovered. That puts pressure on states because
expenses, especially medical expenses and pension benefits have soared.
The Good News
1. The good news (if you
believe it), is that retail sales are finally back to January 2008 levels.
The Bad News
1. State expenses are way
higher than 2008
2. Job growth is anemic and
will likely stay that way
3. Stimulus money has been spent
4. Congress is unlikely to bail
out states
5. Interest rates are higher
6. Mortgage rates are higher
7. Gas prices are higher
8. Congress is seeking spending cuts
9. States are hiking sales and
income taxes
10. Property taxes are rising in spite of
falling home prices
11. Home prices are falling
Ironically, points 4, 8, and 11 are good things for the long-term health of
the economy but economists will not see it that way because it will impact
short-term growth.
Population Adjusted Retail
Sales
I did not factor in population growth but noted that it should be done.
"Dshort" did factor it in and has a nice set of charts that suggest
The "Real" Consumer Economy
Remains in Depression
Monthly Retail Sales With
Regression Lines
The green trendline is a regression through the entire data series. The
latest sales figure is 8.1% below the green line end point.
The blue line is a regression through the end of 2007 and extrapolated to the
present. Thus, the blue line excludes the impact of the Financial Crisis. The
latest sales figure is 16.1% below the blue line end point.
[Mish note: the above chart is not adjusted for population growth and income.
The following chart is]
Population Adjusted Retail Sales
Consider: During the past 21 years, the U.S. population has grown by over 22%
while the dollar has lost about 37% of its purchasing power to inflation.
When we adjust accordingly, the rebound in retail sales from the bottom in
April 2009 merely gets us back to the per capita spending during the late
summer of 1999.
Retail sales have been recovering since the trough in 2009. But the
"real" consumer economy, adjusted for population growth still in a
state of depression — 8.3% below its all-time high in January 2006.
Dshort has some great
charts. Inquiring minds will want to give his site a closer look.
Long Term Retail Spending Factors
Three factors that need to be discussed in light of retail spending trends
are demographics, taxes, and changing consumer attitudes towards debt.
Demographics
·
Boomers
are past their peak earning years and headed for retirement.
·
Boomers
in aggregate will need to downsize their lifestyles.
·
Those
wanting to downsize their houses and simplify their lifestyle have no one to
sell to. This will keep
enormous downward pressure on home prices.
·
Those
fresh out of college cannot afford and will not buy the cars and homes their
parents had.
·
Many
college graduates are despondent over being hundreds of thousands of dollars
in debt with no way to pay it back.
·
Student
loans programs benefit no one but schools and teachers. Eventually students will revolt.
Taxes, Stimulus, Pensions
·
Many
states are raising sales taxes, property taxes, income taxes and fees. This
takes money out of consumer pockets to feed untenable wages and benefits for
public union workers.
·
Cities
and states are bankrupt over untenable public union wages and benefits.
Either wages and benefits must fall or taxes have to go up.
·
The
federal government will either raise taxes, cut spending or both. Either way
will put a damper on growth and retail spending. Raising taxes will put a
long-term damper on growth. Cutting spending is good for the long haul but
will put a short-term damper on growth.
Changing Consumer
Attitudes
·
There
has been a massive secular change in consumer attitudes towards debts.
·
The
trend is housing is towards cash-in refis from cash-out refis.
·
Banks
are reluctant to lend except to the most credit-worthy borrowers.
·
Credit-worthy
borrowers do not want to borrow.
·
Kids see
their parents or grandparents arguing over debt, even losing their homes over
debt, how vowed to not get in the same situation.
Retail sales are up but $150 billion in stimulus spending to states is going
away. Spending cuts in Congress are coming. Pent-up demand for car sales will
end, but pent-up need to dump housing inventory is building. Taxpayers are
fed up, but many states are hiking taxes anyway.
All of those items place enormous headwinds on retail sales. It is quite
possible the latest set of retail numbers is about as good as they get. That
certainly is not priced into equities or nearly anyone's economic model.
Mish
GlobalEconomicAnalysis.blogspot.com
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