Economic news positive

Wow! I go away for a week and the economic stats are rosier suddenly. Maybe I should go away more often.

Today saw many retailers post encouraging results for the month of August. Same-store sales nationwide still declined 2.9%, but this compared to an analyst expectation of a 3.8% drop. Same store sales are exactly what the name implies. Because the comparison for the same store is made to last year’s sales, same store sales only apply to stores open at least a year. The decline was the 12th consecutive month of declines in the aggregate. Again, this is a very strong indicator that your average-Joe citizen (of which I am one) is not spending money; in deference to getting his financial house in order. Long-term this is very positive.

But wait, there’s more…of the stores that beat analyst expectations they did so handily and they represent some of the more dynamic U.S. retailers, e.g. Target and Costco. This is important because Target and Costco both offer a wide-range of goods rather than just apparel. So folks are spending money on a wide-range of goods. A good sign. This is also a sign that folks have a value slant to their purchases as both Target and Costco offer discounted goods relative to traditional retail.

What about apparel stores? TJ Maxx, Ross, and Aeropostale good. Gap so-so. Abercrombie and Fitch bad. And what about department stores? JC Penney and Kohl’s bad. However, department store declines are difficult to perfectly correlate with the recession. Why? Because consumers increasingly don’t like to shop at malls and prefer to get in and get out. This is facilitated by stand alone stores as opposed to malls where you search for parking and then wander.

So while not screamingly amazing, retail sales were the strongest they have been in a year.

Meanwhile durable goods orders were reported up 4.9% in July. This is a big deal because it indicates that people who make important buying decisions are thinking long-term, rather than short-term. This is indicated because durable goods are meant to be, well…durable.

Also in July new home sales rose 9.6%. This is a hugely positive number because it is an indication that real estate markets are working again. Funny that. When prices fall there is movement in the sales of illiquid assets like houses. Underlying all of this is the greater news that credit markets must be working again, too. How else to account for the sales of the houses?

I could go on.

So what has the financial market response been to the news? SELL. Believe it or not this is a positive sign, too. Why? Because it means that folks believe that the stock markets already are pricing the news in and they are taking the chance to lock in profits. Or at least that’s my take on things.

Be well,

Jason