Phantom Sales Surge Goes “Poof”

MONEY AND MARKETS: INVESTING INSIGHTS 

Phantom Sales Surge Goes “Poof” — Is it Cause for Worry?

Mike Larson | Tuesday, March 15, 2016 at 4:20 pm

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Remember that surge in retail sales to start the year off? The one that the bulls on Wall Street cited as proof the consumer is in great shape?Never mind. Government bean counters now say it didn’t happen. Specifically … we just learned that …

BulletSales didn’t rise 0.2% in January. They actually dropped 0.4%.

BulletThe “core” sales figure that’s used to calculate GDP? It didn’t surge 0.6% as previously reported. It climbed only a third of that, or 0.2%.

BulletSales estimates were revised down for electronics … appliances … building materials … personal care … and department store.

The surge in retail sales seen earlier this year never really happened.

BulletFebruary’s figures weren’t very good, either. They dropped 0.1%, with declines in eight out of the 13 categories the Commerce Department tracks.

BulletAuto sales also fell 0.2% for the second month in a row. That very much fits with my view that the car and truck business is going to get much tougher as used-vehicle supply surges and credit conditions tighten.

I don’t usually make such a big deal about a single report. Other data on wholesale inflation and home builder sentiment today was largely in line with estimates.

But these retail revisions are so huge, they simply shouldn’t be ignored. That’s especially true when you consider that retail sales are a key driver of the consumer-led U.S. economy.

The Federal Reserve is also meeting today and tomorrow, so data like this bears watching. The Bank of Japan stood pat overnight, choosing to do nothing even as it admitted growth remains lackluster. That watered down some of the enthusiasm the European Central Bank engendered with its bazooka-gram last week.

“This is a whole new market environment… characterized by increased volatility, more wild swings and an increasing need for caution.”

Overall, I’ll repeat what I’ve been saying for a while now: This is a whole new market environment. It’s one characterized by increased volatility, more wild swings, and an increasing need for caution when it comes to investing strategy. And if the next batch of economic data confirms that things aren’t as rosy as Wall Street thought, you can bet things will get even hairier out there.

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