Holiday Shopping Collapsed. Where the seasonally-adjusted December retail sales number was reported down by 0.37% +/- 0.8% for the month, such was after downward revisions to November’s reporting. Net of revisions, December was down by 0.73%, with November’s previously reported gain of 1.22% now standing at 1.05%. The combined November/December retail sales gain of 0.7% should be in contraction, net of official CPI reporting, with November CPI up by 0.8% plus whatever may be reported tomorrow (January 16th) on December’s CPI. With year-to-year December retail sales reported up by 4.1%, such also should be flat to underwater net of official inflation.

 

Net of grocery store and gasoline station sales, "core" retail sales for December was down by 0.36% (down 1.02% net of revisions), following a revised 0.29% gain in November (previously 0.78%), with reported gains in food prices offsetting reported lower gasoline prices. 

 

An interesting pattern continues to unfold in the food and energy areas, where implicit food and energy inflation reflected in the data appear to be understated one month and then revised upward the next month. This can be seen in the December non-core growth being down 0.4% versus down 0.7% net of revisions, with the December core being down 0.4% versus down 1.0% net of revisions.

 

While retail sales keep getting revised, the CPI does not get revised from initial reporting (unless there is an outright error in calculation). Given the detail of this morning’s retail sales report, which likely reflects understated food and energy costs, and this morning’s December PPI, which definitely understates food and energy costs, there is a pattern in place for soft reporting of tomorrow’s December CPI release.

For December PPI, a seasonally-adjusted monthly decline of 0.1% (an unadjusted 0.4% decline) was reported, after November’s 3.2% boost. Year-to-year PPI eased to 6.3% from 7.2% in November.

 

The inflationary recession continues to deteriorate, with most upcoming reports likely to surprise economic expectations on the downside and inflation expectations on the upside.

 

Further details will follow in the January SGS newsletter.