Tuesday, February 14, 2012

Interpreting the retail sales number

The retail sales number reported today came in mixed. The headline number came in below expectations, but the ex-auto number was strong. There were revisions everywhere.

What to make of this?

I believe that the American consumer it's would be a mistake to think that the American consumer as down and out. The Consumer Metrics Institute produces a series of figures that tracks American consumer activity on a daily basis. The daily series shows a modest uptick.

Daily numbers are inherently noisy, but the monthly figures show a definite rebound in consumer demand.

For the final word, Nomura (via Business Insider) interpreted the retail sales report positively:

The control measure feeds into estimates for the consumer spending component of GDP and suggests a healthy round of spending to start the year. Lastly, our preferred measure of consumer comfort, the category of dining out, increased by a strong 0.6% in January. Dining out can be seen as one of the ultra-discretionary categories of spending that is typically the first place households will cut back on spending if confidence is faltering.
Remember that we are in a central bank induced liquidity rally. Last week the BoE joined the party, this week it was the BoJ. Enjoy.

Cam Hui is a portfolio manager at Qwest Investment Fund Management Ltd. ("Qwest"). This article is prepared by Mr. Hui as an outside business activity. As such, Qwest does not review or approve materials presented herein. The opinions and any recommendations expressed in this blog are those of the author and do not reflect the opinions or recommendations of Qwest.

None of the information or opinions expressed in this blog constitutes a solicitation for the purchase or sale of any security or other instrument. Nothing in this article constitutes investment advice and any recommendations that may be contained herein have not been based upon a consideration of the investment objectives, financial situation or particular needs of any specific recipient. Any purchase or sale activity in any securities or other instrument should be based upon your own analysis and conclusions. Past performance is not indicative of future results. Either Qwest or Mr. Hui may hold or control long or short positions in the securities or instruments mentioned.


Anonymous said...

I agree with you that we are in a liquidity-driven asset rally that we should all participate in. However, I take it that you don't subscribe to the balance sheet recession idea or liquidity trap whereby the private sector is in the process of deleveraging and unable to spend like before. Hence, disappointing retail sales. With unemployment so high and stagnant wages, the consumer can't spend. What economic model (explanation of the economy) are you operating from?

Cam Hui, CFA said...

I do subscribe to the theory of the balance sheet recession. However, surprised as I am, I do have to call the data as I see it.