Friday, January 12, 2007

Retail Sales Increase .9* in December

From the Census Bureau:

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for December, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $369.9 billion, an increase of 0.9 percent (±0.7%) from the previous month and up 5.4 percent (±0.7%) from December 2005. Total sales for the 12 months of 2006 were up 6.0 percent (±0.5%) from 2005. Total sales for the October through December 2006 period were up 4.9 percent (±0.5%) from the same period a year ago. The October to November 2006 percent change was revised from +1.0 percent (± 0.8%) to +0.6 percent (± 0.2%).

Yes, there's an asterisk in the title for a reason. I have a serious problem with this number.

First -- allow me to pat myself on the back. From CBSMarketWatch:

Retail sales increased a revised 0.6% in October and 0.7% excluding autos. This is down from the initial estimate of a 1% gain in overall sales and a 0.9% ex-auto gain.

Regarding the last report, I noted:

So, while the Census data says retail sales increased at a high rate in November, all other surveys say sales of various retail sales components decreased. There is an important difference in methodology in the other reports because they are seasonally adjusted. However, using the old Sesame Street game "One of these things is not like the other one" we come to the conclusion the Census will probably lower their numbers for November.

OK -- self-congratulation over.

Regarding the new .9% increased, consider the following from the International Herald Tribune on January 4th:

Industry sales at stores open more than a year rose 3.1 percent in December, making the holiday season this year the slowest in two years, the International Council of Shopping Centers said. Federated Department Stores' sales rose less than analysts anticipated, and Gap lowered its profit forecast by 18 percent after sales declined.

Slower growth threatens holiday-season profits, which account for almost a third of the industry's annual earnings. Retailers discounted flat-screen televisions, while cold-weather clothes went unsold during the warmest December in a decade.

The slowdown is also an indication that the global economy might not be able to count on the spendthrift U.S. consumer as much as it has in the past.

"The numbers are going to be less robust than everyone hoped for," said Patricia Edwards, who manages assets at Wentworth, Hauser & Violich in Seattle. "Promotions were high and earnings are going to be difficult across the board."

Sales for the two months of November and December increased 2.8 percent. In 2005, sales for the two months had risen 3.6 percent, while sales for December alone had gained 3.5 percent.

"It's at best a moderate gain," said Michael Niemira, chief economist of the International Council of Shopping Centers. "We have certainly seen a slower pace of spending at the end of the year. That's what we're likely to see in 2007."

The economist at the International Counsel of Shopping Centers was less optimistic about the sales numbers than the Census Bureau's numbers indicate. Considering this guy is paid to help spin numbers positively, his statements are very telling. Even removing gas sales from the total we get an increase of .6% which still seems high considering that less than robust pace reported in early January.

In addition, considering the following retail sale headlines from early January courtesy of the Big Picture:

• Retailers Post Disappointing Sales For December on Heavy Discounts (WSJ)
• Warm weather and gift cards pinch December sales (Marketwatch)
• U.S. Retailers' December Sales Slow on Price Cutting (Bloomberg)
• Time to Take Down the Decorations, Earnings Forecasts (Holiday Sales Tracker)
• Shopping Bags Half Empty
• Retailers Post Disappointing December Sales (AP)
• Wal-Mart Expects Continued Paltry Gains (WSJ)

Basically we have the same problem in December that we had in November. Every other data point suggests a fair Christmas season while the Census says sales were really good. Again -- color me skeptical.