ARE RETAIL SALES REALLY RECOVERING?

The government reported retail sales for May this morning and the MSM immediately hyperventilated with unrestrained joy about the rejuvenated consumer. We’re back baby!!! There was no mention of the extremely early Memorial Day, which pushed sales from June into May.

Then you get into the actual numbers. Total retail sales went up by $5.3 billion over April. You will be thrilled to know that 25% of the increase in retail sales was for purchases of gasoline, which has gone up in price by 35% since February. The consumer was surely rejuvenated by spending $1.3 billion more for gas.

Another 36% of the increase was for auto sales. This $1.9 billion increase was generated through subprime loans and 7 year 0% financing. It’s a real stretch calling that a retail sale. Retail rental is more like it.

Discretionary spending at furniture stores, electronics stores, and restaurants were flat with the prior month. This is surely a sign the consumer is back.

The monthly deviations are nothing but noise. The rubber meets the road when looking at the year over year numbers. And they absolutely suck. They reveal an economy in recession. Here are a few juicy nuggets:

• Total retail sales have grown 2.7% over last year, and if the subprime boosted auto sales are removed, only 2.0%.
• The recent trend is even worse. Total retail sales have grown 2.0% and only 1.3% when auto sales are removed in the last three months versus last year.
• When you compare the seasonally adjusted numbers for this May versus last May to the unadjusted numbers, something smells. The “adjusted” numbers show an $11.5 billion increase for a 2.7% annual increase. The unadjusted numbers show only a $4.4 billion increase for a 1.0% increase. There is absolutely no good reason for this year over year “adjustment”. The April figures yielded no such discrepancy.
• Using the unadjusted year over year numbers, when you exclude the debt juiced auto sales, retail sales FELL versus last May. Did you hear that on CNBC? Did you read that on Marketwatch? Not a chance. It doesn’t fit the storyline.
• Electronics, general merchandise (Wal-Mart, Sears, Target), and gas station sales fell year over year. Furniture stores and drug stores were essentially flat.
• So retail sales over the last year are growing at or below the rate of inflation. This does not bode well for retail company profits.

The cheer leading done by the MSM regarding lukewarm, at best retail sales, was crushed by the Bloomberg Consumer Comfort survey later in the morning. If people are spending, why would the buying climate plunge by the most since 2008? Does that jive with the supposed boost in May retail sales?

Then some more reality slapped the MSM pundits in the face. According to the government, auto sales were $9 billion higher in May versus last May. This begs the question of why auto inventories on dealer lots and depots are at all-time highs. Don’t our modern production facilities operate on a just-in-time basis? Something doesn’t smell right. Are the retail auto sales being reported by the government actually GM, Chrysler and Ford selling autos to their dealers and piling up on lots across America? What happens now? These vehicles must be liquidated. The production has to be slowed down. These car makers are barely making money today. Imagine what happens when the next plunge arrives.

And if you think the record auto sales is due to Americans with great paying jobs buying vehicles because they are flush with cash. Think again. The Fed created auto bubble has been sustained by $30,000 seven year loans and 13% interest subprime loans to deadbeats and suckers.

Don’t believe anything you see or hear in the mainstream media. They are there to entertain, distract, and keep you ignorant of your plight.