Fund Manager has calculated just how skewed the retail sales report has become, and it is so bad, we wonder if the Census Bureau is hiring cooks?
As a quick aside, I got an email today from a colleague, a self-admitted “very small fish,” who told me he was now getting cold calls from Goldman Sachs brokers offering “very interesting structured products.” I told him the last time I heard stories like that was in the spring of 2008. One of my best friends was getting ready to jump ship from Lehman before it collapsed – he was in the private wealth management group. He told me he heard stories about Merrill Lynch high net worth brokers selling high yielding structured products to clients. He said they were slicing up the structured garbage that Merrill was stuck with – mortgage crap – that institutions and hedge funds wouldn’t take and packaging them into smaller parcels to dump into high net worth accounts. Something to think about there…
As conditions worsen in the real world economy and political system, the propaganda fabricated in an attempt to cover up the truth becomes more absurd. Today’s retail sales report, prepared and released by the Census Bureau which in and of itself makes the numbers extraordinarily unreliable, showed a .6% gain in retail sales in July from June. As I’ll show below, not including the affects of inflation, in all likelihood retail sales declined in July.
The biggest component of the reported gain was auto sales, for which the Census Bureau attributed a 1.1% gain over June. While this correlates with the SAAR number reported at the beginning of the month, the number does not come close to matching the actual industry-reported sales, which showed a 7% decline for the month of July. Note: the SAAR calculation is fictional – it implies that auto sales, which are declining every month, will continue at the same rate as the rate measured in July. Per the stark contrast between the Census Bureau number and the industry-reported number, the number reported by the Government is nothing short of fictional.
The automobile sales component represents 20% of the total retail sales report on a revenue basis. If we give the Government the benefit of doubt and hold the dollar value of auto sales constant from June to July (remember, the industry is telling us sales declined sharply) and recalculated the retail sales report, we get a 0.03% gain in retail sales.
Another huge issue is the number recorded for building material and sales. In the “not seasonally adjusted” column, the report shows a huge decline from June to July (a $1.3 billion drop from June to July. But through the magic of seasonal adjustments , the unadjusted number is transformed in a $337 million decline. Given the declining trend in housing starts and existing home sales, it would make sense that building and supply stores sold less in July vs. June. But the Government does not want us to see it that way.
Yet another interesting number is in the restaurant sales category, which the Census Bureau tells us increased .3% in July from June. Restaurant sales are also one of the largest components of retail sales, representing 12.1% of what was reported. This number was diametrically opposed to the Black Box Intelligence private sector report for monthly restaurant sales, which showed a 2.8% drop in restaurant sales in July (a 4.7% drop in traffic). The Census Bureau survey for total retail sales is based on 4,700 questionnaires mailed to retail businesses. The Black Box restaurant survey is based on data compiled monthly from 41,000 restaurants. We don’t know how many restaurants are surveyed and actually respond to the Government surveys.
Here’s the Census Bureau’s dirty little secret (click to enlarge):
The sections highlighted in yellow are marked with an asterisk. In the footnotes to the report, the Census Bureau discloses that the asterisk means that, “advance estimates are not available for this kind of business” (Retail Sales report). In other words, a significant percentage of the Government’s retail sales report is based on guesstimates. Lick your index finger and stick it up in the political breeze to see which way you need to make the numbers lean.
I calculated the total amount of sales for which the Census Bureaus claims is not based on guesstimates. 45.3% of the report is a swing and a miss. Not coincidentally, the areas of its report that conflict directly with actual industry-provided numbers and area guestimate categories happen to be auto sales, building materials and restaurant sales. Get the picture?
Just like every other major monthly economic report – employment, GDP, inflation – the retail sales report is little more than a fraudulent propaganda tool used to distort reality for the dual purpose of supporting the political and monetary system – both of which are collapsing – and attempting to convince the public that the economy is in good shape.