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Thursday, July 19, 2012

Retail sales

There was a big unexpected drop in the retails sales data.  Check out this chart.

I find it interesting that during the market crash and rampant fear conditions last fall the sales data never printed a negative number.  We now have three months in a row of declines.  You can see a similar pattern to the months at the beginning of the last recession.  Here is the retail data without autos.

We can see that there was one month with a negative print last fall.  This series has been negative three months in a row also.  The strength in auto sales last fall was a big factor in keeping the economy going. Currently it appears that auto sales have softened a bit.  I read an article in the paper a few weeks ago saying new car prices were starting to fall because lots were getting full of inventory.  I find it interesting that sales are softening, lots are getting full, but the auto companies did not shut down production this month like they have in past years under similar conditions.  If sales continue to slow there will likely be a slow down in production down the road.  That would hurt the GDP number considerably if that happens.

Three months of negative sales data is usually associated with recession.  Another negative print next month would virtually guarantee it.  The evidence that we are likely in recession continues to mount.  Many economists are busy lowering growth for the second quarter.  I have seen some estimates as low as 1.1% from around 1.7% last month.  We are coming into the back to school season soon.  That could propel an increase in sales at some point.  The auto sales data may be important to watch going forward.


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