Capital Commerce

Dude, Where's My Recession?: The Series

June 12, 2008 RSS Feed Print

As the saying goes, "Facts are stubborn things."

Retail sales increased 1 percent in May. The consensus forecast was plus 0.5 percent.
Retail sales excluding autos increased 1.2 percent. The consensus was 0.7 percent.
Sales were also revised, up substantially for March and April.

So tell me, Brian Wesbury and Bob Stein over at First Trust Advisors, what's it all mean?

Today's report is the final nail in the coffin for the theory that the U.S. is in a consumer-led recession. Total retail sales are up at an 8% annual rate in the past three months while "core" retail sales are up at a 10.2% rate. It is impossible to be in a consumer-led recession when retail sales are growing so rapidly. Some analysts will attribute the strength in sales to the tax rebate checks that started being sent at the very end of April. However, sales were revised, up substantially for March and April, and core sales (excluding autos, building materials, and gas) in March and April were about as strong as in May, suggesting the rise in consumption is based on fundamentals, not government checks. Today's report creates considerable upside risk to our forecast of a 1.5% real GDP growth rate for the second quarter of 2008.

And to my pal Barry Ritholtz, with whom I have a recession bet, you can go ahead and purchase those BladeRunner disks now. No need to get express shipping, though.

Tags:: economy,; recession,; sales,; shopping

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The things you are looking at are positive, but they are not the areas that the left has targeted. There were at least three prongs...
1) Turn the housing downturn into a crisis by immediately making credit harder to obtain so that houses became harder to sell. The attack on credit institutions was designed to collapse the money supply and to destroy wealth by exacerbating the housing problem and deflating the economy. They placed the blame squarely on the credit institutions, for making credit available too easily, and thus created a rapid reversal in the conditions that had led prices to rise--and thus brought about a more rapid decline in the value of homes.
2) Increase unemployment by raising the minimum wage. This has worked just as designed. Note that the minimum wage was orginally proposed by labor unions during the depression in order to protect their jobs from competition by unskilled, particularly black, laborers in the South. The Davis-Bacon Act had a similar objective. And the left still supports these measures and for largely the same reasons.
3) Create an energy crisis. The left has done everything possible to stand in the way of this, blocking attempts to increase production of oil and coal, blocking the development of nuclear power, and also blocking even legislation that would have promoted conservation and the development of the alternatives the President has supported, such as hydrogen, cellulosic alcohol from switchgrass, and PHEVs. On top of that, they have threatened a surtax on the profits of those who produce energy and most recently have (astoundingly) threatened to withdraw existing legal potential oil fields from future development.

Mazzula of VA 1:43PM June 14, 2008

Fact: We've never had four months of jobs losses outside of recession. As of the May report we have five months of job losses.
Fact: We've never had the unemployment rate rise more than 0.5% outside of recession. Since last spring it has risien 1.1%.
It is impractical to rely on the key coincident indicators that define recession -- employment, manufacturing & trade sales (of which retail is a part), production and income -- to determine in real-time whether the economy is in a recession – simply put, such indicators cannot recognize a recession until long after the fact, and after all the data revisions are in. Any recession "call" should be based on forward looking data, possibly confirmed by coincident indicators such as employment and the jobless rate which have never behaved this way except around recessions.

Portfolio of NY 9:29PM June 13, 2008

Surprise!
If you give Americans $50 billion dollars, they will spend it! Unfortunately, most of it went to food and energy, and the a lot of that was eaten up by inflation.
My preference is for organic growth, not government checks -- but I know how you socialists enjoy your govie handouts . . .

Barry Ritholtz of NY 6:25PM June 13, 2008

Dude, Where's My Recession?: The Series

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