The Goldman Sachs ICSC chain store sales plunged 6.3% for the week ending December 5 (measured through Saturday each week). The index measures same-store sales for retail chains. A small decline is expected, as this is the week that follows Black Friday week. But I pulled up the data from last year and the same metric declined only 1.8%. And, in 2013 chain store comp sales actually rose 1.5% for the week following Black Friday week.
The economy is collapsing. This is evident from the ongoing crash in commodities, especially the price of oil and natural gas. The consumer is tapped out. There’s a law of economics called the Law of Diminishing Returns. It says that if one input in the production of a commodity is increased while all other inputs are held fixed, a point will eventually be reached at which additions of the input yield progressively smaller, or diminishing, increases in output.
Traditionally this law would apply to production and manufacturing. But in an economy based on the digital printing press, this law applies to money printing and credit creation. At a certain point, the ability of money printing and credit creation reaches a limit at which it can no longer stimulate consumption. Consumption of homes, cars and discretionary purchases.
Retail sales this holiday season will reflect this law as it applies to retail spending. We’ve already seen credit card data from Bank of America that indicates a 10% drop in spending for the November holiday season for through the first three weeks. Goldman’s chain store sales indicator reinforces this stunning fall-off in holiday spending.
Do not get fooled into thinking that online sales will make up for the big decline in brick and mortar store sales. Online sales represent just 6% of total retail sales. Even if online sales tick up to 7 or 8% of total sales, the increase of a few $100 million million will barely dent the decline in total sales, which will be in the billions.
One more point, November retail sales are due out this Friday at 8:30 a.m. EST. The data is compiled and constructed by the Census Bureau. There is no doubt in my mind that they will do their best to manipulate the data into showing an unexpected gain. Consider the source when you see the report.
Next up we will see the application of the Law of Diminishing Returns as it applies to auto and home sales. The Government is already trying to defer the onset of this law in housing as it is now rolling negative down payment, low interest rate mortgages for people with low credit scores. The “negative down payment” is derived from the fact that the homebuyer can borrow money from others to fund the 3% down payment OR take a loan from the community. Sheer insanity.