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Us Retail Sales Rise But Economic Questions Remain

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US retail sales rose in December for the fifth consecutive month, driven by holiday season demand, official figures have suggested.

Sales grew by 0.6% last month compared with November, according to the US Commerce Department.

The increase lifted the annual sales total up 6.7%, the largest annual increase since 1999.

Meanwhile, the Labor Department said December consumer prices rose by 0.5%, the largest increase in 18 months.

About 80% of the increase was due to an 8.5% rises in petrol prices. Core inflation, which strips out volatile fuel and food rises, was up just 0.1% in December.

Volumes up or merely price increases?

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This isn't good folks.

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.5 percent in December on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.5 percent before seasonal adjustment.

The big gains here were in energy, up 4.6%. Coming right into the cold months this is not helpful. Not only was gasoline up 9.5% but fuel oil was up 4.9, which in the Northeast is a primary fuel. Natural gas was also up 1.4%.

A look inside the data tables confirms - energy and to a lesser extent food is where the action was this month. The frightening subindex is the energy commodity one, up 7.5% this month alone.

If that's a one-month blip then we'll get through it. The danger is that it's not, and what we're seeing is a secular shift taking place as a consequence of The Fed's intervention.

Now for the bad news - Retail Sales.

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for December, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $380.9 billion, an increase of 0.6 percent (±0.5%) from the previous month.

That, unfortunately, is an effective zero rate of change.

Folks, the idea that our economy is "recovering" is a red herring. Consumers are not doing any such thing, with the alleged "recovery" being eaten by price increases which are, to a large degree, caused by The Fed.

The numbers are right here. And what's worse is that the 12 month rate of change (6.6%) has been trashed by the PPI - which means we're in big trouble, as the only two places this can come out (the 6.5% change in intermediate goods and 15.5% change in crude goods) are either final sales or margins.

This is either going to produce an economic recession or a profit recession - pick one.

The data has only gotten stronger on this point since approximately August. I fully expect that when it is realized and the piper demands his due, which is almost-certain to be this year, we'll once again hear "nobody could have seen it coming."

Baloney - it's been in the data since the middle of last summer.

Dennigers take on the figures.

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5% yoy nominal rise in retail sales 5% yoy official inflation:- retail sales are flat

5% yoy nominal rise in retail sales 3% yoy official inflation:- retail sales rise by 2% haray

I wonder if the governments over the decades have learnt that if they understate inflation they can overstate economic growth?

Edited by Confounded

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US population is increasing by 2 million per year so in a healthy economy spending should always rise above inflation.

This is not a healthy economy.

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