JOHN WILLIAMS’ SHADOW GOVERNMENT STATISTICS

 FLASH UPDATE

March 12, 2009

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 Annual Retail Sales Contraction Remains Worst of Post-World War II Era

"Core" February Retail Sales Down 0.3%

February 12-Month Rolling Federal Deficit at $955 Billion

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PLEASE NOTE: A full newsletter should follow next week (week of March 16th). Any intervening Flash Updates or Alerts would be published as dictated by economic or financial developments. 

– Best wishes to all, John Williams

Retail Sales Monthly Bottom-Bouncing Continued. The Census Bureau reported that seasonally-adjusted February retail sales eased by 0.11% (rose by 0.63% net of revisions) +/- 0.6% (95% confidence interval). Such followed a revised 1.82% (previously 1.05%) monthly gain in January. On a year-to-year basis, February retail sales fell by 8.58%, versus a revised 8.97% (previously 9.70%) plunge in January. By a wide margin, the three-month moving average of the nominal (not-adjusted for inflation) year-to-year contraction remained the deepest of post-World War II historical reporting. 

The latest reporting saw an upside revision to January, which reversed the recent trend of downward revisions to prior headline reporting. The series is subject to a benchmark revision on April 30th, and some of the current revisions may be positioning the relative monthly changes in near-term data for that update.

What appears to be in place for the second month is the bottom-bouncing suggested in the Flash Update of February 3rd. Economic series usually do not collapse in perpetual freefall, but can bottom-bounce when they hit a low-level plateau of activity. Annual growth patterns, however, tend to remain deep in recession territory, before the next down-leg in activity begins. Also at work may be unusual seasonal-factor adjustments for February, influenced by a sharp one-month monthly contraction in February 2008. The not seasonally adjusted annual growth (adjusted just for calendar differences) was a contraction of 9.2%, which would have resulted in a seasonally-adjusted monthly decline of 0.8% for February 2009.

Core Retail Sales.  Consistent with the Federal Reserve’s predilection for ignoring food and energy prices when "core" inflation is lower than full inflation, "core" retail sales — retail sales net of grocery store and gasoline station revenues — fell by 0.31% (up 0.62% net of revisions) in February, following a revised 1.71% (previously 0.70%) gain in January. Those numbers contrasted with the official aggregate decrease of 0.11% in February and a revised 1.82% gain in January.  On an annual basis, February core retail sales fell by 6.54%, versus a revised 6.83% (was 7.75%) decline in January.

Real Retail Sales.  With higher gasoline prices, and with a small gain (Briefing.com consensus at 0.3%) expected in the February CPI-U release, February’s real retail sales should have been negative on both a monthly and annual basis. Details will follow in a Flash Update after the CPI release next Wednesday, March 18th.

2009 Federal Deficit Should Top $2 Trillion. Fiscal conditions continued deteriorating in the latest Treasury reporting, with the 12-month rolling federal deficit through February 2009 rising to $954.8 billion from January’s $934.8 billion, which was up from December’s $833.2 billion, November’s $701.3 billion, October’s $635.1 billion and September’s (fiscal 2008) $454.8 billion. In contrast, the 12-month rolling deficit through February 2008 was $263.9 billion.

Viewing the change in the level of gross federal debt bypasses several of the regular reporting manipulations of the government’s financial results and is a better indicator of actual net cash outlays by the federal government than is the official, gimmicked deficit reporting. 

Gross federal debt stood at $10.877 trillion ont February 28, 2009, up by $245 billion for the month, and up by $1.519 trillion from February 2008, which in turn was up by $580 billion from February 2007. Gross federal debt stood at $10.632 trillion at January 31, 2009, down by $68 billion for the month, but up by $1.394 trillion from January 31, 2008, which in turn was up $620 billion from January 2007. 

As of the end of September 2008, the close of the government’s fiscal year, gross federal debt stood at $10.025 trillion, up $379 billion for the month and up by $1.017 trillion from September 2007, which in turn was up $501 billion from September 2006.

The official deficit easily should top $2 trillion in the current fiscal year, with related Treasury funding needs likely to facing difficulties, except for buying by the Federal Reserve, lender of last resort to the federal government. On a GAAP-basis (using generally accepted accounting principles), the 2009 deficit likely will top $8 trillion, up from $5.1 trillion in 2008.

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