Wednesday, March 13, 2013

What's Going With Reported Economic News vs. Reality?

Today retail sales for February were released.  The number came in at a quite surprisingly robust 1.1% gain (annualized basis) over January.  Aside from the fact that the number has been put through the customary "seasonally adjusted" meat grinder, it's just not a credible number.  It is likely that the number includes a high inflation factor.  Given that a big part of the gain was a 5% jump in gasoline sales, and given that February's average gasoline price per gallon nationwide was at an all-time high for February, that would explain most of the "gain."

But, in fact, if you strip on the "seasonal adjustment" - the unadjusted actual number is buried in the report - it turns out that sales declined from Jan to Feb, the first month to month decline in 3 years. This makes more sense, as consumers are being squeezed by higher payroll taxes, higher gasoline costs, higher food costs (a whole roaster chicken the other day cost me $1/lb vs. .80/lb six months ago).  And the fact that consumer's disposable income is getting squeezed shows up in the Feb numbers for furniture sales (-1.6%), electronics (-0.2%) and sporting goods (-0.9%). 

Here's what John Williams ( had to say about the matter: 
Reporting here of positive real monthly growth runs counter to various indications out of the business sector, including retailers, retail suppliers and those delivering product, and to indications of a build-up in unwanted inventories.  It also runs counter to the implications of constraints on consumption from the intense, structural-liquidity woes besetting the consumer.  Without real growth in income, and without the ability or willingness to take on meaningful new debt, the consumer cannot sustain real growth in retail sales or in the broader personal-consumption measure of GDP.  As usual, monthly reporting also is skewed meaningfully by seasonal-adjustment issues.
Well, other than that, Mrs. Lincoln, did you enjoy the play?

Finally, just to beat this dead horse into the ground, posted a nice summary of the economic outlook released by the Business Roundtable, a consortium of leading corporate CEO's:
expectations for higher Sales, CapEx, and Employment are as bad as they have been since early 2010. CapEx, the much-vaunted miracle driver of revenues this year, is below Q4 2009 levels of expectation...
Here's the LINK   As you can see, the "seasonally adjusted" number released by the Census Bureau is completely inconsistent with real world data points.  The same holds true for recently released home sales, construction spending and employment numbers.  More on housing soon, as I'm working on an in-depth piece that explains why the housing market is rolling over again.

The Orwellian fog being blown over our system is getting worse.  We learned just the other day that the Dept of Defense has removed all data from its website related to drone strikes in Afghanistan:  LINK  Wonder what else the Government is hiding from us?

There's no question the Government is working overtime to try and juice up our "confidence" in the economy by manufacturing bullish economic numbers and printing more and more money and funneling a significant amount of it into the stock market via the banks.  Makes you wonder just how bad things really are, given that the Fed is buying 50% of all new debt being issued by the Treasury...


  1. I thought the FED has been buying 90% of treasuries.?

    1. During one stretch a couple years ago they were buying 90%. For all of 2012, I believe it was about 60%. Currently it's running around 50%. But who knows how much extra inventory the primary dealers are holding knowing there's a Fed bid that could increase at any time.

  2. Dave, do you think we could have a rally in gold and silver in the current environment? The peak season of the Indian and Chinese demand is about to end and the current sentiment is very bearish. Gold can't even breach $1600 and silver $30. It seems that we have to meander some more time.

    1. I dont' think Chinese demand is seasonal. India's is, but has been becoming less so. Look at the spring of 2006. The metals had a monster move from March to mid-May. Back then China wasn't even a factor. It was India and Viet Nam.

      With the sentiment as bad as it is right now, the length of the current correction, and regular bulls questioning the current set-up, look at the metals market as forest full of dead, dried out wood going into peak fire season...The more the banks and the hedge funds sit on this market, the more violent will the be the next move higher.

  3. I listened to a Jim Willie interview over a today. JW claimed the FED was buying 80% of the paper. The only significant foreign buyer was Japan, coming in at about 10%

  4. GATA: How Gold Markets Are Manipulated
    Wed 13 Mar 13 | 07:41 PM ET
    Chris Powell, Secretary at Gold Anti-Trust Action Committee claims that Western central banks are manipulating gold markets in order to rig currency markets.

    1. Senator Sherrod Brown Drops a Bombshell in Mary Jo White’s Hearing

      The spectacle of warped law enforcement grew worse today during the Senate Banking confirmation hearing of Mary Jo White to head the Securities and Exchange Commission. Under questioning by Senator Sherrod Brown (D-Ohio), White admitted that even the economy of a foreign country – like Japan – is taken into consideration before bringing a criminal indictment in the U.S. Even worse, White was forced to admit that while working for the U.S. Department of Justice as the U.S. Attorney for the Southern District of New York (from 1993 to 2002), she considered it appropriate to speak with Larry Summers (a Treasury Secretary in the Clinton administration) to weigh the economic impact of bringing an indictment.

      forget about the justice system reaching the truth.....too many protective filters.

  5. more temp jobs are coming into nevada but at lower wages. this makes it looks like the economy is recovering because jobs are being created. however, less pay = dead retail. these temp jobs are also at longer hours (12-14 hours per day). so now you pay less for employees, have them work their ass off for more hours just to equal their previous pay, and employers are very happy. those working long hours at low pay and are stupid enough on their one day off to spend it all will be the ones buying. and then the cycle starts over and over again for them. But there won't be enough of them to keep the big box stores open. Even walmart is letting go of people and cutting hours in half right now as they keep opening new stores.

  6. An article posrted on peakprosperity a while back noted that the disconnect between media reports on the economy and reality would be a lot more apparent to a lot more people in 2013.


    "Washoe County recorded 408 sales of existing single-family homes in February, down 12 percent from the same time period in 2012, according to a report released by the Reno/Sparks Association of Realtors on Wednesday.

    But the median sale price was $190,100 — 31 percent more than February 2012 and a 6 percent increase from January.

    “Everybody is kind of saying that with the prices rising that you are really seeing a recovery,” said Brian Bonnenfant, project manager for the Center for Regional Studies at the University of Nevada, Reno. “The recovery will really be evident when the upper-value homes are purchased.”

    "Nevada’s foreclosure pipeline, which slowed to a trickle during the past year, is beginning to flow again.

    The state saw a 334 percent year-over-year increase in notices of default in February, according to a report released today by foreclosure tracker RealtyTrac. It was a 17-month high and also the highest in the nation."

    So now the news is telling us that it can be both ways - right AND wrong, up AND down. etc. No doubt they don't have a clue to what's coming so they just print conflicting articles. Looks like one is saying homes are selling when actually they are selling for more. Both articles came on on March 13, 2013.

    1. thanks for the links. I plan on ousing he foreclosure link in my next housing mkt posting