Friday, June 11, 2010
Retail Sales Report Wasn't Bad, Really
And very definitely not when you look at H.8 Bank Assets and Liabilities. Other deposits rose (SA) 9.2% annualized in May, which was much higher than April's 3.3% or March's 1.9%. In dollars, they rose about 47 billion.
I don't think analysts have come to terms with the reality that most people will have to save and budget for things like clothing purchases, holidays, appliances and car repair. And the reality is that many people will need a hefty downpayment on a car.
And then, there is the issue of the unfortunates who are losing unemployment benefits and being very cautious.
Taking these two reports together gives a very different picture of May's economy. Consumers were just being responsible, and are also probably saving for vacations. The rise in banked money indicates that there is room for future growth in retail. Some of it may have been due to Census, but I am expecting more impact in June from that, because there's a delay in the paychecks.
There is one very interesting thing about H.8. There is a continuing substantial drop in large time deposits (jumbo CDs). It is very significant. Because of its continuous nature, I am guessing that a lot of older people are draining retirement savings to live, probably as a result of having lost a job. From May 2009 to May 2010, large time deposits dropped about 125 billion. Corporations and associations also have money in jumbo CDs, and some may have pulled out tax money. So I waited to see May before commenting. In May, the annualized rate of decline was 37.8%.
I had also thought about home purchases - many persons who wanted the housing tax credit may have pulled money they were saving. Here's the 2010 trajectory:
Feb: -2.1%It will be interesting to see how this runs out. Because these deposits are mostly insured, corporations were tucking money into them, and many people with substantial financial assets were, in one way or another, moving money from money market funds to bank accounts even if they did it through a brokerage arrangement. The extra insurance is dying out, and on the whole most people are more confident about putting their money in non-insured accounts.
I assumed that the major drop in 2010 was due to a mix of factors, but tax payments, housing deposits and cash movements due to lower risk should all have dropped significantly in May. So at this point I would say this is a reading on the financial health of older Americans and perhaps companies. Companies may be withdrawing cash reserves to spend more since the economy has improved a bit. But if older Americans who have lost their jobs are pulling large sums of money out of their retirement kitties, it will be a future problem. I'm sure that represents a lot of this.
In dollar terms (NSA), large time deposits peaked at 1.9 trillion last December, and by May had fallen to 1.75 trillion.
Check the Truth-in-Savings disclosures and see what they said. A CD is a contract governed by federal law.
IMO, as long as Obama and company keep doing there anti-busines/wealth war dance, people are going to remain frightened. If Obama was business friendly, he could create some confidence and money might begin to come out of hiding.
I was hired as an Enumerator. We had a week of full-time training. The following weeks were never more than half-time, and diminishing. The first time we went to on home visits, we cleared up about a third of the open cases. My regular pay didn’t surpass my training pay until the fourth week of employment.
The delay or holding period for pay is only 11 days. Uncle Sugar pays fast.
Training was the last week of April. I have already received and used the vast majority of my earnings in May. June will be a trickle.
My case appears to be standard for about half of the 1000 hires in my big-city Local Census Office. The other half are clerks, with more steady hours, but only 2/3rds my hourly rate.
That is what puts the lie to the Keynesian notion that saving is bad for the "aggregate" economy. For most people, the simple decision to buy so much as a new refrigerator requires some saving. Saving does not harm the economy -- it can only help it.
The fact remains that what is good for the family unit is good for the national unit. They are the same thing.
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