Wednesday, August 15, 2012

The Retail Sales Boom

CBS News did a piece about retail sales last night, citing no actual numbers but saying that they rose last month by the largest rate in five months. They spoke glowingly about how Colorado Springs would be able to keep the street lights on since their revenue depended on sales taxes. Happy, happy, happy.

The Los Angeles Times was even more rapturous, rhapsodizing about “consumers coming back” and jobs as “part time baristas at Starbucks” being gained. Boy, you know your economy is really booming when someone gets a part time position as a barista at Starbucks. Is that exciting, or what?

That part-time barista says that, "Now that I'm working, I've been spending most of my paychecks." The Times is all excited and claims the guy is
“…good news for the economy because consumer spending accounts for about 70% of economic activity.” Well, get on the phone to your stock broker, because with that part-time barista spending his paychecks, where can we go but back to the golden days of 2007?

The Times goes on to give us some numbers, saying that “The Commerce Department reported all major categories picking up. Sales of automobiles increased 0.8%, while retail sales other than autos rose 0.8% as well,“ and then quotes someone as saying that, "When consumers go on a spending spree, then the economy does well." Oy.

Well, 0.8% would hardly be a “spending spree” even if true, but it’s not.

The 0.8% increase was the number “adjusted for seasonal variation and holiday and trading-day differences.” The raw number, not adjusted, was a 3.8% decrease. You may place a lot of faith in “seasonal adjustments,” I do not, but whether you do or not, retailers and governments live on real dollars, not seasonal adjustments.

Money in real dollars that can be used to pay overhead, payroll and inventory, and to provide income is what stores are concerned about. The real money that came in to the cash registers of retailers decreased by 3.8% in July, and that is what the retailers have to deal with. It is the sales taxes on that 3.8% reduction that local governments will have to use for meeting the city’s bills.

A retailer can’t pay his employees with “seasonal adjustments,” and a city cannot keep the street lights on with “seasonal adjustments.” They need money, and in July the money went down, not up. That is a fact.

Paul Krugman loves that 0.8% increase because it’s a number for his spreadsheet that he can look at while he’s sitting in his ivy-covered office in Princeton thinking great thoughts. Democrats love that number because they can point to it and tell you that things are getting better. The guy running a clothing store in Phoenix regards that number as total bullshit, because he saw his sales go down by 3.8% in the real world.

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