Tuesday, December 14, 2010
Retail Et Al
Retail: November's retail report had a very substantial upward revision for October. That got the numbers to a point at which they generally made sense to me. The early holiday shopping should have produced a good pop for October. November's numbers are pretty good, but they do show the drop in furnishings and electronics I was expecting.
It's also worth noting that November's numbers are biased upwards by prices. I expected this holiday season to be good, although not great, due to high deposits at banks. I still think that describes the trend, although some analysts will be a bit disappointed by December sales. The question is really more January sales, and at this point I suspect they might be disappointing.
As to profits, I think trends will mostly be disappointing. Today's Best Buy announcement is probably going to be somewhat typical.
Producer prices for November were released, and they are very interesting. If you have the time, read through Table 4 and look especially at services. You can see the price compression I have been describing develop.
Small business: NFIB's November survey was released. On the face of it this looks more positive, with a business optimism index of 93.2. However actual earnings dropped, which makes me worry a bit. Actual sales also dropped. October seems to have been a better month overall. Expectations are up, but if the current trend holds they will evaporate. Prices are rising much faster than planned on - you guessed it - costs. Actual employment changes are still negative, but significantly better than October. They have returned to their August/September levels which is a real positive. See the employment planned vs actual job openings graph on page 11. Compensation did rise! Page 12.
On labor, the commentary:
Nine percent (seasonally adjusted) reported unfilled job openings, down one point and historically very weak. This Index component is a very good predictor of the unemployment rate – and this number indicated the rate will nudge higher. Over the next three months, nine percent plan to increase employment (up one point), and 12 percent plan to reduce their workforce (down one point), yielding a seasonally adjusted net four percent of owners planning to create new jobs, a three point gain from October.So improvement, but nothing that would show that small businesses can begin to pick up the slack from government. Inventories are flagging a possible problem. Short term credit rates are extremely low.
Last but not least, Manufacturing and Trade Inventories and Sales: It stalled. Some claim this is good; I look at the rise in mfrg inventory ratios and the compression at wholesalers (1.18 and holding) and think that it is not that good:
PS: Looking for the most positive indicator I could find left me with JOLTS; October openings seemed to have reached the level at which we would normally start to see a real jobs recovery. Perhaps not coincidentally, November's household survey data seemed to show that the private sector had reached the turnaround point, although the fiscal problems of government are still swamping the private gains. But the private sector is larger and gains there should slowly conquer the government jobs trend.
I do not know whether current inflation will crush the nascent signs of a stronger recovery. It would be tragic if they did.
Also, sometime in here retirements should escalate and create some openings for younger folks.
PPS: I have been remiss in my Canadian coverage, although I still plod through all the reports every month. Last year and in the spring I warned about Canadian household debt trends and mortgage trends. Now it's going mainstream:
Canada’s top economic officials yesterday urged households to be wary of taking on too much debt after data showed the indebtedness of Canadians surpassed U.S. levels for the first time in 12 years.Part of the problem in Canada is high inflation, which is causing a lot of households to either pull back on spending or amass more debt! In any case, it is time to start looking very carefully at Canadian banks, because the lending trends have been a bit dicey at some. Mortgage lending is a bit suspect.
Bank of Canada Governor Mark Carney, Finance Minister Jim Flaherty and Prime Minister Stephen Harper said in separate public appearances that they are concerned about rising debt. The ratio of household debt to disposable income in Canada was 1.48 in the third quarter according to Statistics Canada, exceeding the U.S. level of 1.47.
Higher fuel costs and higher health premiums
will combine to take out any disposable spending
after Christmas. Without major changes in the tax
code and trade policies, we are screwed.
When you are working a 5 hour shift at one job for $9 an hour, and then go to another 4 hour shift at another job paying minimum wage, and driving 45 miles a day to do it, these costs just eat you up.
The budget crunch on the states gets ever worse, also, and fees and taxes are adding up rapidly.
One of the features of the "deal" worked out is that the $400 a worker tax credit is replaced by the 2% drop in SS tax. This also leaves the low worker in the hole. Only workers earning 20K or over come out ahead.
A long cold winter for a lot of people, to be sure.
Flour up about 16%. Pasta being discounted at some stores, which means it is an attractor, which means that people can't buy meat. Bacon up. Eggs up sharply, which means a lot of people are going to the cheapest sources for animal protein.
Heck, even dried beans are up.
Sooner or later half the northeasterners are going to be eating like southerners.
One silver lining.
But as you and I both know, there's many ways of qualifying a borrower and if they aren't making the payment, those qualifications may be suspect.
Reality is that thing that doesn't go away when you ignore it.
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