Retail Sales & Jobless Claims
Retail sales were released this morning with a small uptick of 0.1% versus last weeks decline of -0.4%. The difference oil and gas prices are back on the rebound and are being felt by the consumer at the pump.
Also, June also saw some pick up in retail sales as people prepare for the 4th of July holiday and summer vacation plans. With kids out of school, college kids coming home and vacation plans being laid, even if more of them are "staycations" it is not surprising the retail sales ticked slightly higher for the month.
However, that is for the month. Year-over-year that number is declining which is showing the real weakness with the consumer overall.
There are two takeaways here:
First, at the same time that retail sales are falling - so are personal savings. This should not be the case. If individuals are drawing down on savings it should be showing up in retail sales as these are generally inversely correlated. Not this time, however, which is showing that the consumer is being strapped to just make ends meet and the difference between his wages, which have also been declining on a year-over-year basis, is not sufficient to keep up with the cost of living and the difference is being made up out of savings.
Second, the year-over-year decline in retail sales is also coming off of peaks that have normally been associated with the peak of economic expansion. With consumers strapped for cash, unemployment remaining high and a struggle to meet the rising cost of living; the economy is showing signs of anemic growth and any retrenchment of the consumer at this point will push the economy closer to recessionary levels. This is most likely why we saw Ben jump the gun yesterday and start hinting at QE 3 as second quarter GDP is most likely going to come in much weaker than most economists expect.
Automobile sales were up last month, unfortunately since that was mostly the stuffing of the deal channels, they were down this month more than they were up last month. Most concerning is the decline in electronics and appliances - this has now become a persistent problem and reflects the lack of discretionary spending habits. It also underlines the bad reports from the few earnings releases we've seen in that space and since this is a leading area in consumption - none of this is a good sign.
In fact the trends in all of the highly discretionary areas like hobbies, sporting goods and books along with electronics are all showing deterioration. The year-over-year trends are not positive.
Jobless Claims Obfuscating The Obvious
Jobless Claims for the latest week came in still above 400k but less than the consensus estimate of 415k. Sounds good on the surface and the media is playing it up as if the economy is now firmly back on track. However, let's crack open the can and take a look inside:
- Automakers are not shutting down, which they normally do, so the seasonally adjusted number is affected.
- Last week’s claims are continually adjusted higher as last week’s claims number was pushed from 418k to 427k. This week’s number will be adjusted up next week so today’s number is pretty bogus.
- Here are the real numbers:
- Non-seasonally adjusted claims – up 45k to 470k
- Continuing claims – 3,727k vs expectations of 3,680k
- This number is also bogus as last week’s number was adjusted UP from 3,681k to 3,712k
Karl Denniger also noted that "...there was a 'special factor' listed in Minnesota as well (their government shutdown) but in addition the July 4th Holiday meant that there was one fewer reporting days in this week. Then there's the whopper of the revision, which basically doubled the decline they reported."Once again it is important to remember that jobless claims ABOVE 300k is normally where we are worrying about a recession and we are currently remaining well above 400k for the last two years with the exception of a very small dip for about a month below that level. Regardless, this is not the type of initial claims numbers that should be promoting conversations of impending economic growth - that is the rhetoric of the past two years.