JOHN WILLIAMS’ SHADOW GOVERNMENT STATISTICS

SPECIAL NOTICE — August 13, 2010

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 Retail Sales Hint at Third-Quarter GDP Contraction

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Brief Observations on Today’s Data. As noted below, posting of the full Commentary planned for today has been pushed into this weekend. Nonetheless, here are a couple of observations on this morning’s CPI and retail sales reporting, which respectively were slightly stronger and weaker than consensus estimates.

July’s rebounding seasonally-adjusted month-to-month 0.31% CPI-U inflation (versus down 0.14% in June) and July’s unadjusted year-to-year 1.24% gain (versus 1.05% in June), partially reflected a swing in seasonal factors that now will be boosting adjusted gasoline prices for several months. The SGS alternative estimates for July annual inflation are 4.5% (1990-base, Pre-Clinton), 8.6% — 8.57% to the second digit — (1980-base).

The 0.41% seasonally-adjusted monthly gain reported for July Retail Sales was statistically indistinguishable from zero growth. After inflation adjustment, the real monthly gain was 0.10% percent. Even with some upside revision to prior periods, the inflation-adjusted July number was below the average for second-quarter 2010. That opens up a fair chance of real third-quarter retail sales contracting versus the second-quarter, with a suggestion that third-quarter GDP could show an outright quarterly contraction, even as reported by the government. Full details will follow in the Commentary. 

Brief Delay for Commentary No. 316. Due to technical problems with Internet access and related timely processing of this morning’s economic information, posting of today’s scheduled Commentary would have been delayed until after the New York markets had closed. With the availability of new banking data late today (i.e. final July SGS Ongoing-M3 Estimate), I have decided to incorporate same in the report and will publish the Commentary over this weekend, including analysis of this week’s retail sales, trade deficit and CPI reporting, as well as an update to the broad liquidity circumstance, bank lending and the general inflation outlook.

The SGS Alternate-CPI data and graphs, as well as the CPI calculator have been updated to reflect today’s reporting. I apologize for the delay and any inconvenience it may cause.

Best wishes to all, John Williams