An anonymous (but known) friend writes me:
“I’m watching CNBC for the first time in about two weeks this morning. They seem to be actually surprised that retail sales dropped in March
Lets see, economy shrinking at 6% rate, unemployment climbing to 25 year high, 600K+plus jobs lost, car sales off 50%, and every discretionary retailer reporting shitty results.
AND SOMEHOW IT’S SURPRISING THAT RETAIL SALES FELL?”
Peter Bookvar fleshes out the details:
Retail sales were weaker than expected with the headline figure dropping 1.1% and ex autos dropping .9%. Digging beneath the headline, there were declines in most categories including motor vehicles and parts which fell for the second straight month even as unit auto sales rose for the month. Furniture fell, electronics got shellacked and there were further declines in clothing which had seen a bit of a rebound thanks to the early year discounts. With many of those discounts abating as the year progresses, the conversation will again return to whether the consumer is in a place to pay full price for goods that were very recently 70-80% off. Additionally, both non store retailers and department stores saw declines meaning people weren’t going out to buy stuff and didn’t buy stuff while staying home either.
On the inflation front, headline PPI fell 1.2% while core PPI was flat. Both readings were less than expected. For some reason, people have gotten optimistic about short term inflation but as I noted last month, the prospect of further price declines as we enter warmer months is very real and that prospect has not abated at all. There continues to be deflation in the pipeline with intermediate goods dropping 1.5% and crude goods, those at the earliest stage of production, dropping .3%. On the crude goods front, the .3% decline is a bit less of a price drop than we’ve seen lately so maybe there will be a let up in the future in terms of the deflation on this indicator. But for now, producer prices continue to contract and as best as I can tell, they will continue to do so for the immediate future.
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