JOHN WILLIAMS’ SHADOW GOVERNMENT STATISTICS

 FLASH UPDATE

April 14, 2009

__________

Annual Retail Sales Contraction Remains
At Post-World War II Era Lows

"Core" March Retail Sales Down 1.4%

PPI Takes Energy Cost Hit Despite Rising Oil Prices

__________

PLEASE NOTE: The full newsletter is about to enter the production process and should be posted in the next couple of days. A Flash Update will follow tomorrow’s (Wednesday, April 15th) CPI release. 

– Best wishes to all, John Williams

Retail Sales Subject to Upcoming Revisions. The Census Bureau reported that seasonally-adjusted March retail sales fell by 1.14% (down 0.70% net of revisions) +/- 0.6% (95% confidence interval). Such followed a revised 0.30% monthly gain (previously a 0.11% contraction) in February. On a year-to-year basis, March retail sales fell by 9.41%, versus a revised 7.89% (previously 8.58%) plunge in February. By a wide historical margin, the three-month moving average of the nominal (not-adjusted for inflation) year-to-year contraction continued the worst levels of post-World War II reporting. 

The latest reporting saw upside revisions to February and January, along with mixed revisions to earlier data. 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. In general, though, the benchmark revisions should show that retail sales of recent years have been weaker than reported previously. Further detail will be discussed in the newsletter.

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 1.35% (down 1.02% net of revisions) in March, following a revised 0.11% gain (previously a 0.31% drop) in February. Those numbers contrasted with the official aggregate decrease of 1.14% in March and a revised 0.30% gain in February.  On an annual basis, March core retail sales fell by 7.00%, versus a revised 5.25% (was 6.54%) decline in February.

Real Retail Sales.  With minimally higher gasoline prices, and with a small gain (Briefing.com consensus at 0.2%) expected in the March CPI-U release, March’s real retail sales should have been negative on both a monthly and annual basis. Details will follow in tomorrow’s Flash Update after the CPI release.

Producer Price Index Drop Exacerbated by Seasonals. Despite rebounding oil and gasoline prices, energy costs tanked the regularly-volatile, seasonally-adjusted producer price index (PPI). For March, the PPI fell by 1.2% (fell by 0.7% before seasonal adjustment). Such followed a 0.1% gain (0.1% unadjusted loss) month-to-month in February.   The BLS data showed March’s year-to-year PPI inflation contracted by 3.5%, versus a 1.3% drop in February. 

Such was the fourth month of formal PPI deflation (year-to-year price decline), subsequent to a 0.4% gain reported for November.  Since 1980, the finished goods PPI has shown formal deflation in 1986, 1994, 1997/1998 and 2001/2002, without the CPI-U ever following suit. As with the current circumstance, those declines and related index volatility often were tied to large swings in oil prices.

On a monthly basis, seasonally-adjusted March intermediate goods fell by 1.5% (down by 0.9% in February), and crude goods eased by 0.3% (down by 4.5% in February). The decline in year-to-year inflation continued to deepen, with March intermediate goods down 8.9% (down by 5.2% in February) and March crude goods down by 39.0% (down by 34.7% in February).

__________