JOHN WILLIAMS’ SHADOW GOVERNMENT STATISTICS

FLASH UPDATE

February 12, 2009

__________

Reflecting Revisions and Inflation,
January Retail Sales Bottom-Bounced at Low-Level Plateau

"Core" Retail Sales up 0.7% versus Official 1.0%

December Trade Deficit Suggested 4th-Qtr GDP Downward Revision

__________

PLEASE NOTE: The newsletter will be published in the next couple of days. This brief Flash Update touches upon this morning’s January retail sales report and yesterday’s December trade report.

– Best wishes to all, John Williams

Monthly Retail Sales Gain Due to Revisions and Inflation. The Census Bureau reported this morning (February 12th) that seasonally-adjusted retail sales for the month of January 2009 rose by 1.05% (0.41% net of revisions) +/- 0.6% (95% confidence interval). Such was after the month-to-month sales decline for December 2008 — the selling climax of the holiday season — was revised to 3.04%, having been reported initially to have fallen by 2.66%. On a year-to-year basis, January retail sales plunged by 9.70%, versus a revised 10.47% (previously a 9.81%) collapse in December.

With several months of falling gasoline prices having exacerbated recently reported monthly and annual retail sales declines, an upturn in January 2009 gasoline prices helped with the monthly January gain. As will be detailed following January CPI-U reporting next Friday (February 20th), the monthly change in real (inflation-adjusted) retail sales should hold in positive territory, but the severe annual contraction in real retail sales should have held near December’s severe decline and near-term cycle low.

The January retail sales results reflected 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.

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 — rose by 0.70% (down 0.01% net of revisions) in January, following a revised 1.73% (previously 1.39%) decline in December. Those numbers contrasted with the official aggregate increase of 1.05% in January and the revised 3.04% decline in December.  On an annual basis, January  "core" retail sales fell by 7.75%, versus a revised 8.68% (was 7.88%) decline in December.

Worse Than Expected Trade Deficit. The Bureau of Economic Analysis and the Census Bureau reported that the seasonally-adjusted monthly trade deficit for December narrowed slightly from revised November numbers, but it was enough worse than expected, with surging oil import volume, to suggest a GDP revision showing a greater contraction in fourth-quarter 2008 than initially was reported.

The seasonally-adjusted December 2008 deficit in goods and services trade was reported at $39.9 billion, narrowed from a revised $41.6 billion (previously $40.4 billion) in November, which in turn had shrunk sharply from a revised $57.2 billion (previously $56.7 billion) in October.  The seasonally-adjusted monthly deficits were revised back to January 2008. The reported "improvements" in the December and November deficits (most of the November improvement) were due to catch-up reporting of collapsing oil prices. That process now has run the bulk of its course.

For all of 2008, the total deficit on a balance of payments basis narrowed to $677.1 billion, from $700.3 billion in 2007. The reported improvement was due to a purported increase in the "services" surplus, which is little more than a guesstimate. The "goods" deficit actually widened minimally for the year.

On the oil front, the average price of imported oil declined to $49.93 per barrel in December, down from $66.72 in November. Continuing to show extreme non-seasonal volatility, crude oil imports jumped to 10.3 million barrels per day, up from 8.7 million in November. For the year, physical volume dropped 2.7%, from 3.69 billion barrels in 2007 to 3.59 billion barrels in 2008.

Further detail on these and other series will follow in the pending newsletter.

__________