FLASH UPDATE - August 13, 2008

JOHN WILLIAMS’ SHADOW GOVERNMENT STATISTICS

FLASH UPDATE

August 13, 2008

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Real July Retail Sales Continue Monthly and Annual Contractions

Monthly "Core" Retail Sales Down 0.33% versus 0.12% Aggregate Contraction

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Giving every indication of an ongoing and deepening recession, the Census Bureau reported this morning that seasonally-adjusted July retail sales fell by 0.12% (up 0.11% net of revisions) +/- 0.6% (95% confidence interval), following a revised 0.35% (previously 0.07%) increase in June.  On a year-to-year basis, July retail sales rose by 2.63%, following a revised June gain of 3.35% (previously 3.04%).  In terms of real growth, however, both the monthly and annual rates of change continued in contraction, given the likely reporting of tomorrow’s July 2008 CPI-U estimate.

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 — fell by 0.33% (up 0.03% net of revisions) in July versus a revised 0.27% (was 0.68%) decline in June, against the official aggregate drop of 0.12% in July and the revised 0.35% gain in June.  It is important to note that the physical volume of gasoline consumption has started to decline in response to high gasoline prices, so the inflation-adjusted retail sales number should take a bigger hit than seen in the "core" rate. On an annual basis, July "core" retail sales fell by 0.53% versus a revised June increase of 0.44%, previously a 0.09% contraction.

Tomorrow’s CPI Report. Consensus estimates for tomorrow’s (August 14th) release of the seasonally-adjusted monthly inflation rate in the July CPI-U are running near 0.4%, per briefing.com. Any seasonally-adjusted monthly increase exceeding the 0.22% monthly gain seen in July 2007 would directly add to June 2008’s annual inflation rate of 5.02% in setting the July 2008 annual inflation rate. Where underlying fundamentals favor an upside surprise to market expectations, targeted manipulation remains of very high risk. A Flash Update will follow the release.