December Retail Sales? Expect More Census Bureau Fairy Tales

The Government releases its retail sales report for December this Friday.   The Census Bureau is the front-man for this report, which means that we can expect something that conforms to the highest standards of statistical manipulation.

But the truth is, we already know based on data released by private-sector entities that retail sales in December, and for the entire fourth quarter, were a disaster.  Six days ago, Macy’s announced that its comp store sales dropped 4.7% in November and December vs. those two months in 2014.  Recall that the Government reported that retail sales actually fell nearly 1% in December 2014.  In addition, Macy’s slashed another 3,000 employees.

I just finished perusing the Cass Freight Index Report for December.  It showed that freight shipments in December dropped 5% vs. November and 3.7% vs. December 2014.  This would include goods transported by train, truck, ship or plane.   The reason freight shipments decline is because orders from retailers decline.  The reason orders from retailers decline is because consumer demand has declined and inventories are high.

We don’t need a bunch of Census Bureau flunkies to tell us how retail sales fared in UntitledDecember – this graph from the Fed based on data compiled by a non-Government organization sums it up – click to enlarge:

This graph shows the year over year change in the ISM backlog of orders index.  This graphic reflects a rather sharp decline in consumer spending since May 2015.

Finally, we know that auto sales dropped 5% in December and were way below consensus estimates.  As Bloomberg describes in reference to the auto sales report last week:  “an ominous indication for December retail sales…Vehicle sales make up about 1/5 of total retail sales and the weakness here will make it hard for December to show any lift.”

Bloomberg was uncharacteristically candid in its assessment.  Typically Bloomberg will apply a heavy dose of “spin” when an economic report falls well short of expectations.   I do believe, however, after the steaming pile of smelly brown stuff that the Census Bureau threw at us with its non-farm payroll report, that we can expect an  encore performance of scatological proportions this Friday when the December retail sales report is released.

And that’s fine with me.  One of my short-sell ideas that will presented in Sunday’s Short Seller’s Journal weekly report is going to be a retailer.  It would be ideal if the retail stock sector experiences a nice bounce on Friday in order to improve the entry price for shorting this particular stock.   You can sign up here for this report:  Short Seller’s Journal. 

Rob from the Netherlands:  I loved your latest SSJ report. Especially THE weekly shorts performed wonderful. Easy to read even for non-native speakers and non-financial educated people. Not only do you provide clear entry information but more important to me how and when to sell/ take profit on THE trade. Indeed you are one of few bringing shorts to the attention of the retail investor.

 

3 thoughts on “December Retail Sales? Expect More Census Bureau Fairy Tales

  1. * S&P 500 ends below 1,900 for first time since Sept. 29

    * Amazon among biggest drags on S&P 500, Nasdaq

    Dave – there has to be a real reckoning at some point. I mean a real reckoning where the torches and pitchforks are out!!! Wonder what holds it all back.

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