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  • Retail Sales Analysis  [Edit or Delete]0 comments
    Sep 14, 2011 12:18 PM
    The retail sales report is out. Here are the most salient points:

    In the retail sales report, an increase in sales of electronics, gasoline and food was balanced with drops in purchases of cars, furniture and clothes. Spending at restaurants and bars also dipped.

    Striping out sales of gasoline, autos and building materials, so-called core retail sales rose 0.1 percent in August, pointing to some resilience. Excluding just autos, sales also were up 0.1 percent

    Note how spending for gas and food increased, compensating for weakness in other areas. I explain later why this trend is not only bullish, but will continue. 
    Furthermore, consumers demonstrated remarkable resilience in lieu of all the headline risks 
     (e.g.,Double dip, bear market, Greece, unemployment, debt ceiling). This comes as no surprise to me because I predicted that none of those risks were a big deal, and they still aren't. The only ones losing sleep over the debt ceiling are the pundits.  
    It's estimated that consumer expenditures account for 70% of GDP, a large increase over the past 40 years

    The personal savings rate has fallen from a high of 12% in the early 80's to 5%.

    Here is the V shaped recovery in retail sales ignored by most financial blogs & the media:

    This is why the retail ETF (XRT) has been so strong since 2009, despite all the stupid pronouncements that the 'consumer is dead' or 'maxed out' or 'deleveraging' by the liberals and libertarians. ( ) 

    In coming years new trends will emerge; the personal savings rate which now stands above 5% will go negative due to surging non-core-inflationary living expenses, mainly food, energy, healthcare and education. This non-core inflation is ignored by policy makers and the bond market because it's supposedly transitory and volatile. As written in earlier essays, surging living expenses for inelastic goods like gas is good for growth because it FORCES the consumer to spend (good luck walking to work lol), and this extra spending goes strait into GDP, profits and earnings. The sticky wage theory says that wages are slow to respond to changes in demand. If lower demand due to falling consumer confidence causes falling prices for electronics and apparel and wages remain too high, the excess savings has to go somewhere. Rather than a bank, The Creators create nosebleed living cost inflation to force that excess money into the economy.

    Consumer expenditure as a percentage of GDP will decline from 70% to 60% due to globalization. Again, this is good news because it lessens to economic role of increasingly dour consumers.

    Why are the republicans ignoring the immigration issue? It comes down to basic economics; more people = more consumption = more growth.

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