Pale sales

This morning U.S. retail sales figures for the month of February were published by the Commerce Department.  The data show that sales were up 0.3% vs. an expected decline of 0.3%.  Interestingly, January’s retail sales figures, originally reported as being up 0.5%, were revised to only being up 0.1%.

Analysis: Certainly a rise in retail sales is a good sign.  However, a 0.3% rise represents an increase in retail sales of 30 cents on a $100.00 purchase.  Nothing to write home about, in my opinion.  Not only that, but retail sales in January were first reported as up 0.5%, only to be revised back down to up 0.1%.  In other words, the retail sales data is statistically insignificant, either up or down.  That means that the U.S. economy remains in a holding pattern.

The staring contest taking place between businesses and consumers continues.  Will U.S. consumers “blink” first by spending like it’s 2007 and thus overcome their unemployment fears?  Or will businesses hire like it’s 2007, thus overcoming their fear of a lack of revenue support from U.S. consumers?  At this juncture it is very hard to see through the fog to the other side.

The figure that I continue to feel haunts the U.S. economic situation right now is that huge 18% drop in consumer confidence in February.  That 18% drop is a full 60x greater than the increase in retail sales of 0.3%.  What is missing data-wise is whether or not that huge drop in consumer confidence will translate into a huge drop in consumer spending.  My intuitive sense is that the U.S. consumer is feeling better about things right now.  Is there any data to support an improved U.S. consumer mood?

First of all, warmer, sunnier weather is on its way.  Don’t laugh.  This is a big deal.  Last year the financial markets tanked in March and I insisted that the sell off was over done.  A portion of my process was recognition that winter was almost over.  Having lived in the eastern U.S. for several years, it is very hard to feel good about life when there are layoffs, economic downturns, financial market collapses and horrible weather.  Winter being almost over is a big deal right now.

Second of all, the Toyota debacle had to be impactful on consumer confidence.  Toyota was that scion of quality and customer satisfaction.  This served as a “shock” to U.S. consumers.  But now that shock is accounted for in the consumer disposition.

Third, while the unemployment situation is treading water, it is not getting worse.  That means that the huge shock of layoffs is most likely behind us.  U.S. businesses are running as lean as they can.  So again, the removal of a negative stimulus on the U.S. consumer organism is a positive.

Net, these factors mean that there should be a pre-disposition in U.S. consumers to start feeling better about things.  So sans any more shocks to the system, ala Toyota, the U.S. consumer should start spending again.  However, this logic has yet to be born out by the numbers.  But my intuitive sense is that folks are starting to feel better.  I will be on the watch for data that either does not support, or does support this belief.

Importance grade: 6; it’s nice that retail sales are up more than expected.  However, a sales improvement of 30 cents on $100.00 is not significantly different from statistical error in my opinion.

Have a great weekend!

Jason