Thursday, July 8, 2010

Mish: The Emperor of Doom Wears no Clothes about Retail Sales

- by New Deal democrat

Readers may recall that I have come to regard Mish as something of a contrary indicator. By the time he trots out a doomish statistic, it is probably very close to its turning point. In the last twelve months railroad traffic, home-price adjusted CPI, and finally state tax receipts all fit this pattern.

Yesterday, dismissing the census bureau's report about retail sales, his entire argument rested -- without citation to supporting data -- on state sales tax collections. Here's what he said:

Month in and month out we hear the same nonsense about retail sales. I will believe it when I see state sales tax collections support the claims.
Reis has it correct and so do I. Not only is it easy to beat record low comparisons of a year ago, same store sales are rising in part because stores are closing like mad.
More importantly, states have been reporting declining sales tax collections for the entire year.

Admittedly state tax collection numbers are frequently delayed by a couple months, but that still does not jibe with overly bullish comments about sales over the first five months of the year from the International Council of Shopping Centers.
(my emphasis)

Well, it's time for Mish to believe. Had he spent 20 minutes checking the data instead of blithely assuming he was right, here's what he would have found about year over year state sales tax collections in May (note the below states are the same ones he relied on in an extensive post last February):

New York State: up 7.8%

Indiana up 5.5%

Texas up 1.5%

Tennessee up 3.7%

Alabama up 2.1%

Georgia up 9.0%

California up 13%

Florida up 6.0%

Pennsylvania up 7.5%

Ohio up 5.5%

Of all the states he reported on in February, only New Jersey reported a decrease in YoY sales tax revenues, down -3.3%.

With one exception, the others weren't just up, but up well in excess of the inflation rate. In short, they supported the bullish Census Bureau report. Mish's own yardstick cuts the legs out from under his argument.

In a way, it's sad. When we wants to, he can do some prodigious analysis. But he has been so blinded by his Austrian/libertarian/goldbug ideology, that instead of fitting his conclusions to the data, he tries to fit the data into his preconceived conclusions.

For example, about three years ago he wrote a number of posts about a money supply measure he called "M prime." He fit those into a version of Kasriel's recession indicator, and got an extremely tight fit with no false positives or negatives. With the hubbub about "double-dip" now, it would be very interesting to see what an "M prime" model showed. But Mish won't do it, because ideologically he has refused to believe the improving data that has been accumulating now for an entire year. Thus, deductively, if there's been no recovery, why examine data that would shed light on a possible double-dip?

In the meantime, the Emperor of Doom is wearing no clothes.