by Chart School - October 22nd, 2014 10:16 am
Courtesy of Doug Short.
In real, population-adjusted terms, Retail Sales are at the level we first reached in December 2004.
With the subsequent release of the Consumer Price Index, we can now dig a bit deeper into the “real” data, adjusted for inflation and against the backdrop of our growing population.
The first chart shows the complete series from 1992, when the U.S. Census Bureau began tracking the data in its current format. I’ve highlighted recessions and the approximate range of two major economic episodes.
The Tech Crash that began in the spring of 2000 had relatively little impact on consumption. The Financial Crisis of 2008 has had a major impact. After the cliff-dive of the Great Recession, the recovery in retail sales has taken us (in nominal terms) 16.3% above the November 2007 pre-recession peak to a record high.
Here is the same chart with two trendlines added. These are linear regressions computed with the Excel Growth function.
The green trendline is a regression through the entire data series. The latest sales figure is 4.3% below the green line end point.
The blue line is a regression through the end of 2007 and extrapolated to the present. Thus, the blue line excludes the impact of the Financial Crisis. The latest sales figure is 19.3% below the blue line end point.
We normally evaluate monthly data in nominal terms on a month-over-month or year-over-year basis. On the other hand, a snapshot of the larger historical context illustrates the devastating impact of the Financial Crisis on the U.S. economy.
The “Real” Retail Story: The Consumer Economy Remains at a Recessionary Level
How much insight into the US economy does the nominal retail sales report offer? The next chart gives us a perspective on the extent to which this indicator is skewed by inflation and population growth. The nominal sales number shows a cumulative growth of 169.8% since the beginning of this series. Adjust for population growth…
by Zero Hedge - October 22nd, 2014 9:54 am
Submitted by Tyler Durden.
“They know Baghdad. They’ve lived in Baghdad,” said Lt.Col Oliver North, warning over the weekend that sources in Iraq believed ISIS was planning a “major attack” against the embassy in Baghdad. Yesterday we get some confirmation – via ISIS – that they did in fact reportedly strike the U.S. embassy in Baghdad. As Inquisitr reports, on Tuesday the Islamist militant group took credit for a mortar attack against the embassy in Baghdad. The group bragged about the attack on social media, claiming that there were likely casualties – “Four rockets strike Green Zone in #Baghdad; helicopters hovering over the Green Zone; ambulances heading that way after strikes!!” one ISIS militant noted on Twitter. As North concludes, “They are at the gates of Baghdad. They’re coming for us.”
Clips posted by ISIS of the mortar attack…
ISIS militant Social media claiming the hits… (via ISIS Tracker)
ISIS has reportedly struck the U.S. embassy in Baghdad in what could be the furthers incursion yet into Iraq’s capital.
On Tuesday the Islamist militant group took credit for a mortar attack against the embassy in Baghdad. The group bragged about the attack on social media, claiming that there were likely casualties.
ISIS has been increasing its attacks on Baghdad in recent weeks, including a wave of car bomb and mortar attacks on Sunday that left at least 150 people killed. Four car bombs exploded in Shia districts of Baghdad, leaving 36 people dead and 98 wounded in a span of two hours.
ISIS fighters have been encamped in suburbs surrounding Baghdad, and earlier this month sent four mortar shells into the Green Zone, the heavily protected location of the U.S. Embassy and other government buildings.
This is likely no surprise as Lt.Col Oliver North has warned…that sources in Iraq believed ISIS was planning a “major attack” against the embassy in Baghdad.
“They know Baghdad. They’ve lived in Baghdad,” North said of the militants reportedly planning the attack.
They are at the gates of Baghdad. They’re coming for us,” he added.
But North’s predictions were also tinged in political criticism, as he used the prediction as a way to
by Zero Hedge - October 22nd, 2014 9:23 am
Submitted by Tyler Durden.
One of the greatest misconceptions plaguing modern economics is that just because there is broad inflation (real, not hedonic, seasonally-adjusted or a burst in Saudi Arabia dumping crude to pressure a Russian default), then nominal, and real, wages also have to increase.
The problem is that without the latter, there can be no actual economic recovery, and instead one ends with stagflation, something Japan is acutely experiencing right now.
Another problem: with nearly one hundred million people out of the labor force, and epic slack within the workforce, there is virtually no amount of inflation in this environment that can force corporations to not only stop firing people (see M&A bubble) but actually hike their pay (except of course for BTFD “traders” at major hedge funds and bank prop desks).
And just to confirm this, alongside the CPI data released earlier which showed the smallest possible broad price increase, when considering that previously the BLS reported flat nominal hourly wages in September, it implied that real wages declined once again. Sure enough, in a separate report today, the BLS announced that real average hourly earnings (in constant 1982-1984 dollars) declined once again, this time from $10.34 to $10.32, a -0.2% drop from past month.
This also means that since March, there has been just one month in which real hourly wages have increased, and that was mostly due to the outright deflationary print the BLS reported last month.
As for the flipside, there have now been 5 outright decreases in real hour wages since March of this year.
Putting America’s real wages in context, the $10.34 real hourly wage is at a leve last seen in December 2008, just after Lehman collapsed.
by Chart School - October 22nd, 2014 9:17 am
Courtesy of Doug Short.
The Bureau of Labor Statistics released the September CPI data this morning. Year-over-year unadjusted Headline CPI came in at 1.66%, down from the previous month’s 1.99%. Year-over-year Core CPI (ex Food and Energy) came in at 1.72% (rounded to 1.7%), little changed from the previous month’s 1.70%. The non-seasonally adjusted month-over-month Headline number was up 0.08%, and the Core number was up 0.23%. On a seasonally-adjusted basis, the all items index was up 0.1%.
The CPI for Urban Wage Earners and Clerical Workers (CPI-W), which is used to calculate Social Security cost-of-living-adjustments, rose 0.1%, which was enough to ensure that the 2015 COLA will be 1.7%.
Here is the introduction from the BLS summary, which leads with the seasonally adjusted data monthly data:
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1 percent in September on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.7 percent before seasonal adjustment.
Increases in shelter and food indexes outweighed declines in energy indexes to result in the seasonally adjusted all items increase. The food index rose 0.3 percent as five of the six major grocery store food group indexes increased. The energy index declined 0.7 percent as the indexes for gasoline, electricity, and fuel oil all fell.
The index for all items less food and energy increased 0.1 percent in September. Along with the shelter index, the index for medical care increased, and the indexes for alcoholic beverages and for personal care advanced slightly. Several indexes were unchanged, and the indexes for airline fares and for used cars and trucks declined in September.
The all items index increased 1.7 percent over the last 12 months, the same increase as for the 12 months ending August. The 12-month change in the index for all items less food and energy also remained at 1.7 percent. The 12-month change in the shelter index has been gradually increasing, and reached 3.0 percent for the first time since January 2008. The food index has also risen 3.0 percent over the span, while the energy index has declined 0.6 percent. [More…]
Investing.com was looking for increases of 0.1% for Headline and 0.2% for Core CPI. Year-over-year forecasts were 1.7% for both…
by Zero Hedge - October 22nd, 2014 9:15 am
Submitted by Tyler Durden.
After last month’s shocking 0.2% drop in CPI, driven almost entirely by plunging gasoline prices, September CPI once again posted a modest rebound, rising 1.7% from a year ago, or 0.1% month over month, just above the 0.0% expectation, with core prices excluding food and energy rising precisely in line with the 0.1% expected.
Broad prices were pushed lower by another month of declining energy prices (Gasoline -1.0%, Fuel Oil -2.1%), however offset by rising food prices which increased by food up 0.3% and Utility bills, rising 1.6% in September – the highest price increase in Utility bills since the 7.5% surge in March.
Then again, one wonders how food inflation is so subdued when the report itself notes that “the index for beef and veal rose 2.0 percent in September and has now risen 16.7 percent since January. The index for dairy and related products increased 0.5 percent, its tenth increase in the last 11 months.” But hey: there is always artificial food in a box which is plunging.
Some other items that saw an increase in price included Medical Care Commodities (+0.5%), Shelter (+0.3%) and Transportation services (+0.1%). After dropping -0.2% in August, hedonically and seasonally-adjusted apparel prices were supposedly unchanged in September.
The detailed breakdown:
The food index rose 0.3 percent in September after increasing 0.2 percent in August. The index for meats, poultry, fish, and eggs continued to rise, increasing 0.7 percent after a 1.5 percent increase in August. The index for beef and veal rose 2.0 percent in September and has now risen 16.7 percent since January. The index for dairy and related products increased 0.5 percent, its tenth increase in the last 11 months. The index for other food at home also rose 0.5 percent in September, with the index for sugar and sweets increasing 1.6 percent. The index for nonalcoholic beverages, which declined 0.2 percent in August, rose 0.2 percent in September. The fruits and vegetables index also turned up in September, rising 0.1 percent after declining in August. The index for fresh fruits rose 1.3 percent, while the fresh vegetables index fell 1.1 percent. The cereals and bakery products index declined in September, falling 0.4 percent. The food at home index has risen 3.2 percent over the past year.…
by Zero Hedge - October 22nd, 2014 8:26 am
Submitted by Tyler Durden.
“The U.S. is, for better or worse, the growth engine of the world economy right now”
– Adolfo Laurenti, chief international economist for Mesirow Financial in Chicago.
It will be the plotline of scary stories parents tell their children for decades to come: in Q1 2014, the US economy was supposed to grow 3%… and then it snowed. This led to a -2% collapse in the world’s largest economy. Yes, inconceivably heavy snowfall (in the winter), and frigid temperatures (in the winter), were the reason for a $100+ billion swing in US GDP. Well, as the following chart from DB’s Torsten Slok shows, of the roughly $2 trillion in GDP the global economy is expected to grow in 2015, about 90% of that is expected to come from China and the US!
And while we reserve judgment for what the ongoing housing slide in China may mean for global growth (recall “the aggregate exposure of China’s financial system to the property market is likely to be as much as 80% of GDP” which means about 70% for the upside in global GDP), we don know one thing: it better not snow in the US this winter.
In fact, with a global economy set to grow only in a priced to perfection US and Chinese environment, the weather better not deviate from the norm by more than 1 degree on any given day or else the global economic recovery gets it.
Ok fine, no snow. But is it realistic to assume a tri-coupling: namely a break of China and the US from the rest of the world? That answer is up to the reader, but as Goldman shows, aside from snow, in a world in which Europe has now unofficially entered a triple-dip recession and Japan has admitted that Abenomics has failed…
- YAMAMOTO:WAS MISCALCULATION TO EXPECT WEAK YEN TO BOOST EXPORTS
… just as we explained over the weekend, the US economy has numerous pitfalls to avoid if there is to be no US, and thus, global recession in the coming year. Here is what the WSJ said on the issue overnight:
“The U.S. for now is growing on
by phil - October 22nd, 2014 8:07 am
What an amazing recovery!
Just one week ago the World was coming to and end and now everyone has their rally caps back on. Investors really are sheep – except I think sheep have better memories… We're still right on plan of dropping 10% and then bouncing 4% (strong bounces) by Wednesday (today) that was initiated on October 6th by our friends at the Fed (see yesterday's post for the summary). For those of you keeping score, our strong bounce predictions for today were:
The Dow is just 17 points away from our goal and we'll just need the NYSE and the Russell to confirm their bounce lines and THEN we can get bullish again. Meanwhile, we actually got a bit more bearish in our Short-Term Portfolio (also in yesterday's post) as our Long-Term Portfolio popped right back to up 18.1% for the year so we wanted to lock those gains in with the STP, which finished the day up 81.8%, down from 92% in the morning as the markets rocketed.
by Zero Hedge - October 22nd, 2014 8:05 am
Submitted by Tyler Durden.
- Russia Loses Oil Ally in De Margerie After Moscow Crash (BBG)
- Austria’s Erste denies report it has failed stress tests (Reuters)
- Sweden gets two new sightings, as hunt for undersea intruder goes on (Reuters)
- Companies Try to Escape Health Law’s Penalties (WSJ)
- Mud and Loathing on Russia-Ukraine Border (BBG)
- NOAA employee charged with stealing U.S. dam information (Reuters)
- Lower Oil Prices Seen Easing Japan’s Trade Pain (WSJ)
- Michigan becomes 5th U.S. state to thwart direct Tesla car sales (Reuters)
- Maglev Train Seen Making Washington-to-Baltimore Trip at 311 MPH (BBG)
- Brazil’s Rousseff Gains Ground, Poll Show (WSJ)
- Global Growth Woes Threaten to Beset U.S. Economy (WSJ)
- Faulty airbags warning expanded to 6.1 million U.S. cars: NHTSA (Reuters)
- Traffickers use abductions, prison ships to feed Asian slave trade (Reuters)
- Yahoo Delivers Message to Activist Starboard: Back Off (BBG)
- Former Washington Post editor Ben Bradlee dies at 93 (Reuters)
- China approves $24.5 billion in rail and airport projects (Reuters)
- States Ease Laws That Protected Poor Borrowers (NYT)
Overnight Media Digest
* With the health law’s insurance mandate for employers set to kick in next year, companies are trying to avoid the law’s penalties while holding down costs, using strategies like enrolling employees in Medicaid. (http://on.wsj.com/10ljcx6)
* Behind the scenes, top U.S. officials concluded the Syrian city of Kobani had become too symbolically important to lose and they raced to save it. (http://on.wsj.com/1vKNQM3)
* New York state’s top regulator expanded its probe of Ocwen Financial Corp, saying the mortgage-servicing company backdated thousands of letters to borrowers that prevented them from being able to promptly correct problem loans. (http://on.wsj.com/1t4uD7b)
* A push to tighten mortgage-lending standards in the wake of the housing bust has given way to making credit more accessible as Washington frets about the strength of the housing recovery. On Tuesday, federal regulators took a big step toward easing postcrisis lending rules, agreeing to drop a proposed requirement that borrowers make a 20 percent down payment in order to get a high-quality mortgage. (http://on.wsj.com/1zk28XC)
Equity Levitation Stumbles After Second ECB Denial Of Corporate Bond Buying, Report Of 11 Stress Test Failures
by Zero Hedge - October 22nd, 2014 7:05 am
Submitted by Tyler Durden.
A day after a Reuters headline blast proclaimed that, in a stunning turn of events, the ECB which has barely started buying covered bond (of countries like Germany today for example, because the record low yielding Bunds clearly need help from the ECB) will also buy corporate bonds, sending the stock market soaring the most in 2014, it has now backtracked for the second time, and following a report from the FT yesterday which denied the report, the second denial came straight from Reuters itself which hours ago said that the ECB “has no concrete plans to buy corporate bonds, but this could be a way to prevent the bank from paying too much for just covered bonds and asset backed securities, ECB governing council member Luc Coene told Belgian media.”
“We still haven’t had a serious discussion about the purchase of corporate bonds,” Coene, who is governor of the Belgian central bank, told business dailies L’Echo and De Tijd. “If we limit ourselves to buying covered bonds and asset backed securities there is a risk that we would pay too high a price. We can prevent that by also buying corporate bonds,” Coene added. “But there is no concrete proposal for that on the table.”
And if and when the ECB ever begins buying corporate bonds (of which there is once again not enough to boost its balance sheet to the required size but more on that later), the ECB can just jawbone that in order to not overpay for bonds, corporate or otherwise, it will just begin buying equities, and so on until the ECB has “no choice” but to monetize the garbage in your trash so as not to overpay for your kitchen sink.
However, if the ultimate goal of yesterday’s leak was to push the EUR lower (and stocks higher of course), then the reason why today’s second rejection did little to rebound the Euro is because once again, just after Europe’s open, Spanish Efe newswire reported that 11 banks from 6 European countries had failed the ECB stress test. Specifically, Efe said Erste, along with banks from Italy, Belgium, Cyprus, Portugal and Greece, had failed the ECB review based on preliminary data, but gave no details of the size of the capital holes at the banks.
by Zero Hedge - October 22nd, 2014 1:57 am
Submitted by Gold Standard Institute.
by Keith Weiner
An interesting article on MarketWatch today caught my attention. The subhead is the money quote, “Back in April every economist in a survey thought yields would rise. Guess what they did next.”
Every? The article refers to 67 economists polled by Bloomberg, all of whom would seem to believe in the quantity theory of money. This means they believe a rising money supply causes rising prices. That means they think the bond market expects inflation. Which means they expect the interest rate to rise, because investors will somehow demand more.
It didn’t happen because every assumption in that chain is false.
Many people also expect interest rates to rise after the Fed’s bond buying program—quantitative easing—ends. Let’s take a look at the yield on the 10-year US Treasury bond from 1981 through today. This graph is courtesy of Yahoo Finance, though I have labeled it as carefully as I could for the three rounds of QE so far.
By zooming out to capture the entire time period of the bull market in bonds—i.e. the period of the falling interest rate—we can put QE in perspective.
The 10-year US Treasury bond now yields 2.21%. For reference, the 10-year German bund is 0.87% and the 10-year Japanese government bond is 0.48%.
It’s obvious from the chart, that QE is not the cause of today’s interest rate near 2%.
MarketWatch implicitly acknowledges that the conventional theory is 100% wrong. I have published an alternative, The Theory of Interest and Prices in a Paper Currency. It’s a long read in seven parts, but I have tried to keep it accessible to the layman.
Spoiler alert: I think interest rates will keep falling to zero, though of course there can be corrections.
The interest rate is pathological. It’s like an object that gets too close to a black hole. Once it falls below the event horizon, then a crash into the singularity of zero is inevitable.
You are cordially invited to The Gold Standard: Both Good and Necessary, in New York on Nov 1. There hasn’t been a real recovery from the crisis of 2008, and there won’t be until we return to the use of gold as money. Please come to this event to hear Andy Bernstein present the…