Unexpected Flop
The Bloomberg Econoday consensus was for December retail sales to be flat from November, in a range of -0.6% to +0.7%.
Economists missed the mark by a mile as the Census Data shows sales fell 1.9%.
Adding insult to injury, the Census Department revised November to the downside.
Negative Revisions to November
- Total retail sales went from +0.3% to +0.2%.
- Excluding vehicles, sales went from +0.3% to +0.1%
- Excluding vehicles and gas, sales went negative in November as well, from +0.2% to -0.1%.
Advance Sales
Advance estimates of U.S. retail and food services sales for December 2021, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $626.8 billion, a decrease of 1.9 percent from the previous month, but 16.9 percent above December 2020.
Total sales for the 12 months of 2021 were up 19.3 percent from 2020.
It’s not how the year went that matters, but rather where we are headed. The economy is slowing just as the Fed is about to hike.
Advance Retail Sales Detail
The above chart clearly shows three rounds of fiscal stimulus, one under Trump in April of 2020 and two under Biden early in 2021.
Those stimulus checks padded spending but the stimulus has now worn off. Holiday sales were a flop, even nonstore retailers, down 8.7% in December.
That category includes Amazon.
Fed is Always Late
The Fed is always late to hike, blows bubbles in the process, then chases its own tail.
Tale rather than tail is arguably more accurate. The Fed believes what it wants to believe rather than the data at hand.
How Many Rate Hike Are Coming?
The above chart shows Fed rate hike projections looking ahead.
Previous dot plot projections pre-pandemic shows one participant predicted a 4.75% Fed Funds rate for 2020!
On December 15, 2021 I penned The Fed Expects 6 Rate Hikes By End of 2023 – I Don’t and You Shouldn’t Either
Clown Acts
In today’s clown act, five FOMC participants actually believe that in 2024 the Fed will hike all the way to 2.75% to 3.25%.
I am confident there will be another recession by 2024.
Admittedly, I am typically a early in my recession calls. But these clowns never see them and Ben Bernanke denied a major one we were already in.
The only faith anyone should have in these Dot Plots is they will be amazingly wrong.
Real and Unreal Inflation: Workers Lost Money 9 out of 12 Months in 2021
One more point on retail sales. They are not adjusted for inflation. Real, inflation-adjusted spending was even lower.
Meanwhile, Workers Lost Money 9 out of 12 Months in 2021 thanks to the bubbles the Fed blew in trying to stimulate inflation.
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Mish
I am waiting to see Jan CPI report which comes out early Feb.
and a 25bp hike won’t change anything. The Fed is still hoping the price rises themselves will slow demand. However you’ve answered that because you and everyone else will be struggling to keep employees unless they react to workers demands for inflation matching pay (or more).
“Ominous Message
The U.S. typically builds its supplies of gasoline from November through February. Then, they’re drawn back down in spring and the summer driving season.
This year, inventories are starting off well below the seasonal norm and there are signs that work on oil refineries could slow the buildup of stockpiles. ExxonMobil Corp.’s Baytown oil refinery, the fourth largest in the U.S., has suffered a fire and this spring’s refinery maintenance season is set to be heavy. Demand, meanwhile, has been trending above normal. Supplies are also low in Europe — one of the country’s biggest suppliers.”