Retail Sales Are Now Getting Hit – Dave Kranzler

TND Guest Contributor:  Dave Kranzler

Warren Buffet was on Fox Biz being interviewed by Liz “Fire Bush” Clayman today.  I guess she must be his new babe.  He said that if he were in charge of the Fed, he would not raise interest rates.  We can take that to mean that the Fed won’t budge once again next week…

The stock market didn’t start getting spanked until August 19th.   That means Wall Street’s financial goon squad or the White House thugs can’t blame a decline in retail spending in August on China.

The first indicator was in early August, when the NY Fed released its survey of household spending expectations.  Here’s what that looked like, courtesy of Zerohedge:

Consumers reported that they expected to increase their spending by just 3.5% in the next year, the lowest reading in the history of this particular data series.

It should have come as no surprise, then, when Gallup released its August consumer spending survey this morning, which showed that daily spending in August averaged $89, which was down from both August 2014 and August 2013.  It was also the fourth month in a row of year over year spending declines:  Gallup August Consumer Spending Poll.

This finding is consistent with a report released last week from Thomson Reuters which showed that shopping mall traffic in August was much weaker than was expected, as same store mall sales declined .5%, missing  the estimate of a .2% decline.  71% of the retails surveyed missed their sales estimates.   While the author of the report did his best job of applying heavy lipstick to the pig, you can read the details here:   Weak Mall Traffic In August.

Finally, the August retail sales “picture” is confirmed by Gallup’s Weekly Economic Confidence survey, which shows that the public’s confidence in the economy has been declining quickly since February:

As Gallup describes: “Americans remain pessimistic about the outlook for the economy.”

The weekly poll hit an 11-month low last week and bounced a bit this week.  But you can see from the trend in the graph to the left that American’s confidence in the economy is rapidly eroding.

The Fed and Wall Street can say what they want about the state of the U.S. economy.  But the numbers are hard to refute.  Sure, economic data polls have margins of error or can be manipulated into reflecting misleading results – or highly misleading results, in the case of most Government-generated data series – but when you combine the data in the Gallup surveys with the actual results being reported by retailers, it’s hard to refute the truth when it’s held up to your eyes.

Of course, no one in a position to do so is willing to hold up the actual facts to the Fed or to the pundits on CNBC/Bloomberg/CNBC and hold them accountable in a public forum.  But I can guarantee one thing:   there will not be an interest rate hike in September or December (caveat:  they might implement a gratuitous hike in the discount rate, but no one borrows from the discount window anymore so it’s a meaningless gesture toward monetary policy “tightening).

Warning:  when the Fed doesn’t hike rates in September, I have no doubt that they’ll work some form of blame on China into their Orwellian FOMC minutes narrative.

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About Dave Kranzler:

 I spent many years working in various analytic jobs and trading on Wall Street. For nine of those years, I traded junk bonds for Bankers Trust. I have an MBA from the University of Chicago, with a concentration in accounting and finance. My goal is to help people understand and analyze what is really going on in our financial system and economy. You can follow my work and contact me via my website Investment Research Dynamics.  Occasionally, I publish on Seeking Alpha too. As a co-founder and principal of Golden Returns Capital, LLC Mr. Kranzler co-manages the Precious Metals Opportunity Fund, a metals and mining stock investment fund.

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