November Retail Sales and Producer Price Index: How You're Being Lied To About Inflation


Gotta love this….

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for November, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $378.7 billion, an increase of 0.8 percent (0.5%) from the previous month, and 7.7 percent (0.7%) above November 2009. Total sales for the September through November 2010 period were up 7.8 percent (0.5%) from the same period a year ago. The September to October 2010 percent change was revised from +1.2 percent (0.5%) to +1.7 percent (0.2%).

Let’s look inside….

Here’s the internal table… and it immediately demolishes the CNBS spin machine which said “Electronics are down, that’s why BBY missed!”

That’s a damned lie!

Electronics were down seasonally adjusted but in gross sales amounts they were up huge from October to November, exactly as expected.

Companies don’t report “seasonally adjusted” sales numbers.  They report gross amounts.

This is the sort of outrageous LIE that you are fed every single day in the so-called “mainstream media.”  It’s an outrage that our so-called “press” hides behind the First Amendment.  It’s one thing to make a mistake, it’s one thing to believe something and be wrong, it’s quite another to hold yourself out as a subject-matter expert on national television, cable or otherwise, and put forth absolute crap where the truth is staring you right in the face.

Truth: Auto sales, building materials and garden supplies, gasoline, sporting goods and food service places (restaurants) were all down on an unadjusted basis. 

The two “gotchas” in here are gasoline, which has had gross sales down even though gas prices are up, and dining and drinking, which were down despite the holiday season during the Black Friday weekend when they should have been up due to all the people shopping.

The problem remains cost-push.  I’ve noted that restaurants have been sneakily-increasing prices.  They’re pulling add-ons into ala-carte (e.g. sides that used to be included with the main course) and ratcheting up prices a bit.  Gasoline has been on a tear comparatively, yet gross spend on gasoline is down.  This strongly implies that we’ve reached the point where price influences behavior.

The PPI was also out this morning and confirmed:

The Producer Price Index for Finished Goods rose 0.8 percent in November, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This increase followed a 0.4-percent advance in both October and September. At the earlier stages of processing, prices received by manufacturers of intermediate goods climbed 1.1 percent in November, and the crude goods index moved up 0.6 percent.

Great.  More than 9% annualized.  But there is no inflation, right?

And where is it?  Food and energy, as I’ve been talking about.

That’s nice.  Now extend that 1% monthly change in foods out a year.  More-importantly, look at the prices in energy – straight up since August.  That’s all about The Fed and it’s BS QE2 games.

Worse is the crude goods price change less food and energy – core:

These changes are ridiculous on a 12-month basis.  Ex-food and energy they’re even worse, as there have been some substantial negative numbers there.  I have discussed the problem with these input costs extensively – there is no pricing power to pass them through the chain of production, as is shown by the much lower escalation in intermediate goods. 

This means margin collapse folks.

Betting that it won’t show up in final profit numbers is flat-out insane

These costs have to show up somewhere.  If you can’t pass through costs to the consumer then you have to eat it, and ultimately this results in margin – and profit – collapse.

Discussion (registration required to post)