What Recovery?

Mish Shedlock notes a discrepancy:

On Thursday, a slew of retailers posted monthly same-store sales. They were described best as a “mixed bag.” There was no obvious trend in terms of up or down, even within specific categories of retailers. But bulls on the economy should be disappointed.

For one thing, notes Mike “MISH” Shedlock author of Mish’s Global Economic Trend Analysis, the same-store sales gainers benefited by the general reduction in store locations. Essentially, survivorship bias is skewing the numbers. If somehow you could take into account all the locations that had been shuttered, you’d see that things were much worse.

And there’s evidence for this, notes Mish. State sales tax collections remain depressed, with no indication of a rebound. That, more than the corporate numbers, is the key thing to pay attention to.

Companies can produce phony baloney numbers to show that their sales are increasing even in the face of the obvious but that doesn’t crteate actual profitability, just the illusion of it. Let’s consider a specific instance.

Unless you believe there’s a huge underground economy that’s not reflected in the sales tax figures, even with Internet sales accounting for an increasing proportion of retail, sales tax revenues are a pretty fair proxy for actual retail sales, at least on an up or down basis. I live in Illinois. Here in Illinois we’ve seen sales tax revenue decline pretty consistently over the last three years (nominal dollar sales tax revenue peaked here in 1998).

I’m no artist.

There are a couple of things that should be considered in looking at that chart. First, these figures are taken directly from the Illinois Department of Revenue’s month by month reports of sales tax receipts over the period of the last three years. They aren’t estimates, projections, or other concocted figures. They aren’t seasonally adjusted. They’re real numbers.

Second, these are nominal dollars, not adjusted for inflation.

Third, the trend is pretty clearly down. Whether you measure from peak to peak, from trough to trough, or try to perform some sort of smoothing, Illinois’s retail sales receipts are going down. Interestingly, these figures look just as I’d expect with the highest receipts being for December reflecting holiday spending and the lowest reflected in March.

Maybe Illinois isn’t typical. I invite you to collect data for your own state and publish a similar chart for it. If you don’t have a blog of your own, I’ll publish the chart here. Although I wouldn’t be surprised if some state somewhere were doing a lot better, I suspect that most are seeing much what we’re seeing here.

Actual retail sales are down. New housing permits are down. Employment is down. Home prices are stagnant at best and continuing to fall in many parts of the country. Business spending is lackluster.

What recovery?

7 comments… add one
  • Icepick Link

    There is no recovery unless one works in the financial sector. Those worthies have benefitted from trillions of dollars in bail-outs, both directly (TARP, MBS purchases by the Fed, etc.) and indirectly (changes to accounting rules allowing banks to ignore real loses, low Fed rates, trillions of new Treasuries issued, etc.). The rest of us have effectively received nothing. We’ve been screwed by both parties.

    Oh, there’s one exception to the “rest of us” – federal employees. (Even the state employees were only temporarily bailed out by ARRA, Obama’s “stimulus” act. They are having to pay the piper starting right about NOW.) The Feds are taking care of themselves*.

    There’s going to be Hell to pay if people figure out exactly how we’ve been hosed. The Tea Party movement and the anti-incumbent movement are merely the first whiff of brimstone, and neither is likely to accomplish much. If they were we would see significant numbers of incumbents losing in their primaries. Until everyone from Nancy Pelosi to Orin Hatch are sweating it in the primaries nothing will happen. And the system is too rigged for anything but sporadic outbreaks during primary season, and the districts are too gerrimandered for much to happen during the general election season.**

    No, like Medicare our electoral system is broken. What isn’t obvious is what will happen when the final collapse comes along. Will a new generation arise to take control of the country in an orderly manner? Will we fall into complete chaos? Or will we get something more like the French Revolution? I can think of other scenarios, including those worse than mentioned above. But speculation is worthless. The potential futures are exploding in number and variety right now, even excluding truly exceptional events. (E.g. a six mile wide nickel-iron asteroid hitting the Earth.) I wonder if this is what it felt like in July and August of 1914?

    * Regulatory capture comes up frequently on this site. let’s not forget that the government has captured itself. And in the ultimate bit of regulatory capture, the lawyers have captured Congress, and thus the rest of the nation.

    ** Contrary to the opinion of many, it’s not that we need a viable third party. It’s that we need to eliminate the two parties we’ve currently got.

  • Recent employment reports have shown a 6% increase in employment in the financial sector. Even considering that’s from a base substantially reduced since 2007, IMO that’s the wrong direction.

  • steve Link

    Interesting that nominal dollars peaked in 1998. This is then a long term trend? Would be interesting to know how much of that is internet driven. As to the larger issue, I still think it is looking more like a demand problem. Will try to find the link later, but one of the Fed facilities put out a large report suggesting that lack of consumer interest remains the dominant factor in no recovery. Our recoveries have been taking longer and this one was more severe. We still have overcapacity and way too many houses in inventory. This will take a while.


  • Icepick Link

    And we may have yet <a href="http://www.nytimes.com/2010/07/12/business/global/12refinance.html"another credit crunch coming soon. But no doubt we can trust the bankers (central and otherwise) to get things right. After all, they’re already telling us so!

    Stephen G. Cecchetti, head of the monetary and economic department at the institution, called the refinancing issue “a vulnerability and something to be watched.” But, he added, in a telephone interview, “I am confident that national authorities will take the necessary actions so that it isn’t a problem.”

    Just like they took action from 2004 to 2006 to prevent the creation of a giant hosuing and credit bubble? Hahahaha!

  • There are a couple of things that should be considered in looking at that chart. First, these figures are taken directly from the Illinois Department of Revenue’s month by month reports of sales tax receipts over the period of the last three years. They aren’t estimates, projections, or other concocted figures. They aren’t seasonally adjusted. They’re real numbers.

    There is an obvious seasonal component with each spike you see in the data occurring at the same time, December. Adjusting for inflation would like make the situation look even worse. After all, given inflation in nominal terms we expect people to spend even more just to maintain real levels of expenditures. In other words, we’d likely decrease the most recent dollars back to their base year counter parts. Overall, the graph points to a grim picture for retail sales in Illinois…to the extent that Illinois is representative of the rest of the nation then it is not good news at all. Could it be internet driven? I doubt it. It might be a factor, but I doubt it is that significant.

  • Actually, there is the appearance of ‘recovery’ in some sectors. But it’s bogus and not market driven.

    What is actually happening is that everyone whom can is taking profits/income in tax year 2010 instead of next year because that’s when Obama’s outrageous tax increases kick in. If you think the numbers are bad now, ( especially unemployment) just wait.

    As far as I’m concerned, anyone who voted for this out-of-control charlatan and his gang owes the rest of us a huge sorry.

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