Wednesday, May 13, 2009

Retail Sales Fell "Unexpectedly" in April

Retail sales are like other economic statistics in having too much variability to base conclusions on the month-to-month changes. In fact, thanks to financial deleveraging, the economy contracting is so strongly that the monthly numbers aren't even news.

Not to be daunted by the obvious, the media felt compelled to perform their mindless monthly ritual, adding no economic value to the data -- witness this pointless headline from Bloomberg today: U.S. Economy: Retail Sales Unexpectedly Fell in April.

Retail sales fell unexpectedly? On which planet? Who was expecting increased retail sales when more people lost their jobs in April? When more families lost their homes? When there are five unemployed people for every job opening? When Chrysler is in bankruptcy and GM is about to go bankrupt? Well, Bloomberg must believe it, because they repeated it in the body of the report:

Retail sales in the U.S. unexpectedly dropped in April for a second month, indicating that rising unemployment is prompting consumers to conserve cash.

Maybe Bloomberg just likes to emphasize the redundancy of this kind of non-news, because they contradicted themselves in the same report, admitting what everyone (including the "experts") already knows -- that consumer spending is dead and will remain that way for a long time:

Fewer jobs, falling home values and the biggest loss of household wealth on record may limit consumers’ ability to spend for years, analysts said.

If anyone has an income, he or she is saving as much of it as possible, because consumers have caught on that the bubble-induced good-old-days are gone. They have too much debt to deleverage, and their expectations for the future are greatly reduced. When the US returns to positive economic growth, it won't be at the rates that everyone came to take for granted. You can bet that consumer spending will be reduced "for years".

Too bad for the malls, because this nation is over-built with retail space that can't be supported any more. Look for retail occupancy rates to continue shrinking.

On the bright side, investors can think about which retailers will survive, how they will tighten their operations, and when they might start growing their businesses again. When economic activity has reached bottom, retailers will start to show positive year-over-year sales comparisons. If valuations are low enough then, maybe people will even start to think about buying the retail stocks ... that is, if would-be investors have saved enough money to afford more than putting food on their tables.