Retail Sales Ringing in a Santa Rally

I have been cautioning folks not to jump to the wrong conclusions on retail data. For one thing, Wal-Mart is the 800 Lb gorilla of retail, and yet Wal-Mart is not included in most of these surveys. For another, this season looks to be late and discount-driven, so historical trends will mislead (as will comparisons to last year, a really dismal year). 

Right now WNT, AMZN and for some reason BBY are having good seasons. (Probably because BBY is staying competitive in the recent DVD price wars with the other two; but it may reflect decent purchasing of consumer electronics; see chart below.) This is showing up in the broader stats than just quick surveys: the first chart from SeekingAlpha shows how dramatic the V-Shaped recovery in retail has been over the terrible year last year.

The Commerce Dept reported higher than expected sales today for November (and revised Oct down a bit, steepening that V shape). A more precise view of the change on a monthly and annual basis also shows the V (the first chart smooths over 6 months):

Within the gross numbers are some surprises, including auto sales continuing to climb a bit ever since the post-Clunker drop in Sept. This chart from EconompicData shows a major part of the increase was from gas sales, due to higher gas prices, and auto sales:

The report comes with concerns over its bogosity. Karl Denninger is highly skeptical of it, primarily due to a change in both the samples for the survey and in adjustments that do not include price changes. The Wall Street Cheat Sheet note that the report clearly beat expectations, but caution that the unadjusted numbers are much bleaker:

  

They also add that retail sales at Walmart and similar mass merch, plus online/mail order, did increase. This is consistent with what I have been reporting.  Also, CalculatedRisk shows a chart with retail with & without gasoline, to take out the effect Karl was most skeptical over. It is apparent from the chart that retail has truly picked up a bit:

The effect is even clearer on a line chart of monthly retail sales, courtesy SeekingAlpha: 

Be of good cheer! The Santa Rally is here. It is after Xmas we should be concerned.

Comments

[DG]

The first comment at the Wall Street Cheat Sheet link made a good observation about sales tax revenues being down almost across the board. That doesn't jibe with sales increases of any sort.

[upstart]

I've been waiting for months for a particular junk bond fund I follow to reach the top of a precisely-defined box using box theory. It reached it Thursday. This could correspond to at least a short term top in stocks as well.

[Hank Wernicki]

Sunday December 13th
9:30 am

90m parent fractal paired bottom for the DXD

IF it holds, a big spike UP Stop is close from Friday

Watch the futures tonight

Got a buy for Rite Aid for its earnings this week , but wait ..... till Thursday

Got a buy on GDX

DBC has a bottom for a spike UP

[Cary Lloyd]

December 29, 1989 was THE top in Japan.

I expect we'll have a major top around that time this year.

[vipul garg]

indian markets are at a very crucial juncture with a huge move around the corner.

[Roger D.]

The "Broadening top in The S&P 500"

enjoy,

Roger

http://www.screencast.com/users/fast996/folders/Default/media/273b7284-72b2-4b80-99bf-675f9c672f4d

[yelnick]

DG, the retail UP saels tax DOWn is a conundrum! Possibly contributing is an increase in mail order or online vs in store retail. Also, b2b transactions are down. Often overlooked is the chain of b2b transactions that lead to products, which is crushed in a depressionary environment even while the intermediate products do not add to GDP. Yet they still should show up at retail. Anyone have an explanation? Are the sales tax data lagging and will soon catch up to retail surveys?

[jane]

Sales tax figures will obviously down on discounted and cheaper items than the reference quantity of goods/services.

[Roger D.]

Just wanted to show this chart of Dow componet UTX, as it is so perfectly formed and will be a primary B wave classic of a historical nature.

The C wave has 7 waves up where the final wave has 5 waves into the top.

It also is tracing out a tweezer top and should have a final thrust up tomorrow to set the "B" top, giving way to the long awaited 3rd wave or C down.

This chart simplifies this long corrective wave up and should be comfort for bears and a warning to bulls.

Roger

http://www.screencast.com/users/fast996/folders/Default/media/2dee9ffc-0890-4b6a-b8a6-34b6bf20a82c

[joe]

The dollar is doing pretty well so far tonight - there is no pullback happening from friday - the opposite.

[Roger D.]

Joe,

Fib support at 76.410 and 76.314, should bottom and resume the advance towards 77.00

Roger

[joe]

I agree Roger.

Joe

[joe]

You know I thought the Dubai World bond defaults were priced into their bonds - apparently I was wrong - and when they default today on the first bond it could get interesting. Clip from Bloomberg.

“The non-payment would be taken as an indication that Dubai wishes to reschedule all three bonds,” said London-based Richard Segal, an analyst Knight Libertas Ltd. “I fear that those who are expecting the payment might find some sort of an anti-climax. If that happens, I expect prices to drop to the levels where they were before.”

http://www.bloomberg.com/apps/news?pid=20601087&sid=a4UG68YKqaGg&pos=1

[graspthemarket]

Great analysis of the retail sector. Thanks for your ideas. Whether we have a Sanata Rally or not, you and I agree on one thing...it doesn't look good in the over all picture. I'm short, but I also have plenty of cash to get more in if we do rally. Let me draw a brief argument together on the increase in retails sales posted last week. To me, things just don't seem to fit together. Let me try to make this look right on the post:

Debt/credit contracting + personal savings up + unemployment higher than last Christmas + 30-50% decrease in real estate prices = consumer is spending more.

How do these things add up to having the consumer spend more?

Thanks for any ideas,

Jason

[joe]

Its "new math" Jason.

Now one plus one equals whatever the government wants it to be.

[mannfm11]

That is why year over year sales tax receipts are down 8% to 10%. This is more about trying to lie us into recovery than honest reporting.