Saturday, March 13, 2010

Economic Data Strengthens While Fundamentals Weaken!

We are in the midst of what some folks refer to as an "inflection point", a place in time where a significant shift is in the process of occuring.   Just like a well-trained illusionist, they divert your attention to where you should NOT be looking in order to pull off their "magic".

As far as the economy goes, a slew of data continues to pour in adding credence to the notion that we are in a building recovery.  This data is both misleading and guiding the uninformed to make decisions that will prove costly.

Retail sales, a key barometer of economic activity, showed surprising strength.   As reported by the Commerce Department yesterday, they rose last month by 0.3%.  Economists, surveyed by Dow Jones Newswires, had forecast a 0.3% decrease in February sales.  With the Super Bowl early in the month, electronic store sales soared.  (Now, somehow I seem to recall reading somewhere that the weather was lousy and the sales were supposed to be pretty bad! (

Retail sales data are an important indicator of consumer spending.  Consumer spending makes up 70% of demand in the U.S. economy.  The unexpected increase moved Macroeconomic Advisers to push their forecast for first-quarter gross domestic product growth up, by four-tenths to 3.1%.

Excluding the car sector, all other February retail sales rose 0.8%.  Economists had forecast a 0.1% increase.  Excluding automobiles, sales in January rose 0.5%, revised from a previously estimated 0.6% gain.

Then, of course, we had more "good" news as the unemployment rate fell below 10% despite the fact that, on net, jobs were LOST! (

The brilliant Dr. Williams of Shadow Stats ( has weighed in with his ungarbled data to help set the record straight!

Dr. Williams reports that the heavy public hype of the anticipated large jobs gains ahead completely ignores the impact of census hiring.

Accoring to Williams, the census will have only a very temporary impact on employment and virtually no impact on the economy.  While hundreds of thousands of part-time census jobs will boost payroll employment in March through May 2010, they all will be lost in sharp cutbacks in June through September.  That, at least, was the pattern of jobs change around the 2000 census, which also was conducted as of April 1st of that year.  Details of temporary census jobs patterns seen around the last two census periods are available from The Bureau of Labor Statistics (BLS).

The retail sales report for February 2010 indicated a statistically insignificant, seasonally-adjusted monthly gain of 0.34% and followed a revised 0.15% (previously 0.48%) monthly gain in December.  Although the February numbers likely reflected some dampening effect of severe blizzards, the monthly gain was artificially boosted by downward revisions to prior reporting as well as ongoing inflation.

On a year-to-year basis, the February 2010 retail sales were reported up by 3.85% from February 2008, versus a downwardly revised 4.08% (4.71%) annual gain in January.  Rising gasoline and food prices  —  as suggested by increased gasoline station and grocery store revenues  —  accounted for 58% of the reported monthly gain in February sales!

If we remove the effects of inflation, according to Williams, February 2010 retail sales activity likely will show both monthly and annual gains, although the revised real January number has turned negative month-to-month in revision.  

Perhaps this explains why consumer sentiment and among small business owners continues to drop.  The supposedly beneficial economic activity isn't translating into anything material as far as middle-America goes, even if the folks at "Government Sachs" continue to reap huge profits ! ( and (

Are we being unfair to "da boyz club" in Washington, D.C.?  If you think so, TAKE ME ON!

Marko's Take

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