Flash Update
JOHN WILLIAMS’ SHADOW GOVERNMENT STATISTICS
FLASH UPDATE
April 14, 2008
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March "Core" Retail Sales Unchanged for Month, Down Year-to-Year
Trade Data Enhance Prospects for 1st-Quarter GDP Contraction
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Please Note: The SGS-Ongoing M3 estimate has been updated for full-month reporting and the latest Federal Reserve data revisions, available on the Alternate Data tab at www.shadowstats.com.
–Best wishes to all, John Williams
Annual Real Retail Sales Growth Sinks Deeper into Recession, Down About 2%
The financial markets remain highly vulnerable when they can get bounced around sharply by poor-quality analysis of secondary economic statistics, as has happened in the last week or two. New claims for unemployment insurance usually show sharp week-to-week volatility when the reporting period (or the one preceding) covers a holiday or quasi-holiday such as Good Friday. While the Department of Labor reports the claims data as seasonally adjusted, those adjustments invariably do not work well. In like manner, same store annual sales are not adjusted for holiday or trading day variations in comparative months. In 2007, Easter was in April, but in 2008 it fell in March. Accordingly, March’s "stronger than expected sales" were inflated by the earlier Easter shopping, as was confirmed in the softening rate of annual growth reported in this morning’s seasonally-adjusted March retail sales release.
Retail Sales Increasingly Suffer Net of Inflation. The Census Bureau reported seasonally-adjusted March retail sales increased by 0.15% (up 0.32% net of revisions) +/- 0.6% (95% confidence interval), following a revised 0.36% (previously 0.56%) monthly decline in February. On a year-to-year basis, March retail sales rose 1.97% versus a revised 2.92% (previously 2.58%) in February. The real (inflation-adjusted) monthly change should be negative, while the real annual change continued to show a deepening contraction, down by roughly 2%.
Core Retail Sales. Consistent with the Federal Reserve’s predilection for ignoring food and energy prices, "core" retail sales — retail sales net of grocery store and gasoline station revenues — were unchanged (plus 0.01%) in March, against the official 0.2% (0.15%) gain, following a revised 0.34% (0.36% official) decline in February. "Core" retail sales turned negative year-to-year, down 0.37% for March, following a 0.66% gain in February.
CPI Implications.Although increasing once more — after unbelievable monthly declines in February — food and energy price inflation rates for March (roughly 0.3% and 1.1% respectively), implied by the retail sales numbers, still were unbelievably tepid, but they generally were consistent with the soft consensus expectation of 0.3% for Wednesday’s (April 16th) release of March CPI.
Trade Deficit Surges. Despite significant continued understatement of oil imports (average import price was up to $84.76 per barrel in February from $84.09 in January), the seasonally-adjusted February 2008 trade deficit widened to $62.2 billion from a revised $59.0 billion (previously $58.2 billion) in January. Such was enough beyond market expectations to put a damper on first-quarter estimates of GDP growth. With growing official and market talk of a recession, the Administration appears increasingly willing to accept a first-quarter contraction in real GDP. Such, however, remains counter to usual political practice in an election year, and the Bureau of Economic Analysis remains able to bring in reported GDP growth at any level desired (report due April 30th).
March M3 Growth at 17.4%. Incorporating full reporting for March and large revisions just published for M2, annual growth in the average SGS-Ongoing M3 rose to a record 17.4%, from an upwardly revised 17.2% (was 17.0%) in February. With account balances shifting between categories in the various Ms, M2 growth now is slightly weaker than previously reported, up by 7.0% in March, from 6.7% in February, while annual M1 growth has revised into positive territory, up by 0.2% in both March and February.
Hyperinflation Special Report Errata. The currently posted text for the Hyperinflation Special Report of April 8th has been updated to correct several typos and to revise the text on page 21 as to gasoline pumps not able to pump more than $50 of gas at one time. Indeed, as pointed out by a subscriber, that limit is related primarily to credit card security polices, not to the physical limitations of the pumps. The corrected text reads:
While I have been advised that a number of businesses have accounting software that can handle any number of digits, I also noted on a recent cross-country trip that a large number of gas stations have older pumps that cannot register more than two digits’ worth of dollars in their totals or more than $9.99 per gallon of gas.
Week Ahead. The March PPI and CPI readings, due for release respectively on Tuesday (April 15th) and Wednesday (April 16th), normally would be expected to be quite strong, topping currently soft expectations of roughly 0.4% and 0.3%. Such would be no more than minimal catch-up from the underreporting of food and energy prices in February, forgetting underlying fundamentals that add other upside reporting pressures. Nonetheless, the March retail sales report suggests continued underreporting in the non-core areas, and the Fed certainly would like to see low inflation numbers to counter its overt abandonment of trying to contain inflation.
Both March housing starts and industrial production, due on Wednesday (April 16th), should come in below consensus, with a deepening year-to-year contraction in housing and another month-to-month decline in industrial production.
The various economic data will be reported on more fully in the upcoming mid-April newsletter.
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Continuing market turmoil, central-bank/government intervention and systemic shocks remain within the general outlook, which is unchanged.
Publication of the next regular newsletter is targeted for Monday, April 21st, with intervening Flash Updates and Alerts posted as needed. The next Flash Update is planned for Wednesday, April 16th, following release of the March CPI data