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Sunday, February 28, 2010 2:03 PM


Retail Sales Rise: Where? Let's Take a Look; Expect Nothing Less Than Panic


In response to For 15 Million Unemployed any Job is a Good Job; Questions for Pollyannas; Wishes Aren't Fishes reader "Sunny Jim" asks ...

Mish

What puzzles me is that with such large numbers of people without jobs or adequate jobs, how can retail sales continue to hold their own? If people still had their house ATM or were increasing their credit card debt, I could see how they could keep spending at pre-recession levels. But people are paying down debt, not increasing it. Something just doesn't jibe IMO.

With the current job situation, I would expect to see retail sales at something like 90% of the bubble years sales. Do you have any retail sales data that verifies the stress in the employment situation?
Advance Retail Sales

In essence, Sunny Jim is questioning the January 2010 Advance Retail Sales Report from the US Census Bureau, released on February 12.
The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for January, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $355.8 billion, an increase of 0.5 percent from the previous month and 4.7 percent above January 2009.

Total sales for the November 2009 through January 2010 period were up 4.3 percent from the same period a year ago.

Retail trade sales were up 0.5 percent from December 2009 and 5.3 percent above last year. Gasoline stations sales were up 29.0 percent from January 2009 and nonstore retailers sales were up 12.4 percent from last year.
Gasoline Sales

The only thing believable in the census bureau report is rising gasoline sales in terms of dollars spent, not gallons sold. The latter is a measure of real demand.

Here is a chart of real energy remand from the Department of Energy.



Demand is down but gasoline sales and sales taxes are up because price has soared.

Methodology Is Completely Bogus

To understand why the Advance Retail Sales report is completely bogus, we must first analyze the Census Bureau Methodology.

The advance estimates are based on a subsample of the Census Bureau's full retail and food services sample. A stratified random sampling method is used to select approximately 5,000 retail and food services firms whose sales are then weighted and benchmarked to represent the complete universe of over three million retail and food services firms.

My Reply To Sunny Jim

Sunny Jim
Retail sales are not what they seem

I have written about this before but not enough. The published numbers are based on "same store sales". Think about all the companies that have gone bankrupt. Take Circuit City for an example. Gone. The doors are closed. Some of those shoppers went to Best Buy where same store sales rose.

Also remember that Best Buy and many other chains closed weak stores. The result: same store sales went up again.

Government methodology for reporting retail sales is based on sampling stores in existence. It does not factor in stores not in existence but recently were. Nor does it handle closed stores when the chain is still doing business.

Government reporting of retail sales is fatally flawed.

To understand what is going on, all one has to look at actual tax data. Heard any rosy numbers from states about sales tax collections?

Let's take a look at some real numbers.

New York

Sales tax collections worst in recent history
Feb 28, 2010

As if there wasn’t enough proof of an aching economy, the Office of the State Comptroller recently issued a report on the sales tax collection for all counties in New York state in 2009, providing even more evidence that the economy is struggling.

The report released by State Comptroller Thomas P. DiNapoli compares 2009 to 2008 collections, and found a 5.9 decrease in collections statewide.

Sales tax-declines were experienced by 53 of the 57 counties in the report. Only four — Chatauqua, Oneida, Schuyler, and Seneca — counties experienced a growth in sales tax revenue, but the report attributes it to other factors other than economic growth, like late payments and other technical adjustments.

“Unlike other recent downturns, 2009 was the first time in recent history that there was actually a decline in county sales tax revenue — a sign of the severity of the recent recession,” the report reads. “The sales tax decline in 2009 was one of the worst on record.”

“This is yet another sign that the Great Recession is having a continuing impact on our communities across New York,” DiNapoli said in a release. “These numbers are sobering. Fortunately, many local governments have taken sometimes painful budgetary steps to stave off disaster. It’s a struggle, but all levels of government have to make every taxpayer dime count.”

The report didn’t offer much room for optimism, stating that tax collections are largely driven by two factors — personal income and employment.
“Both of these factors are expected to remain weak in 2010,” the report reads.
Indiana

Monthly Net Collections Reports

December 2009 Sales Tax: 476,111,101.58
December 2008 Sales Tax: 497,628,352.13

November 2009 Sales Tax: 473,363,430.53
November 2008 Sales Tax: 504,327,778.19

October 2009 Sales Tax: 485,658,222.21
October 2008 Sales Tax: 546,284,648.12

Take a good look at those numbers. By the way, the only comparisons that make any sense are the way I just did it above.

Texas

Texas Sales Tax Collections

January 2010 State Sales Tax Collections To General Revenue
State sales tax net collections* deposited to general revenue totaled $1,655.3 million in January 2010. Compared with the $1,928.3 million collected in January 2009, this represents a decrease of 14.2 percent.

December 2009 State Sales Tax Collections To General Revenue
State sales tax net collections* deposited to general revenue totaled $1,653.1 million in December 2009. Compared with the $1,869.4 million collected in December 2008, this represents a decrease of 11.6 percent.

November 2009 State Sales Tax Collections To General Revenue
State sales tax net collections* deposited to general revenue totaled $1,696.9 million in November 2009. Compared with the $1,983.1 million collected in November 2008, this represents a decrease of 14.4 percent.

October 2009 State Sales Tax Collections To General Revenue
State sales tax net collections* deposited to general revenue totaled $1,517.9 million in October 2009. Compared with the $1,739.8 million collected in October 2008, this represents a decrease of 12.8 percent.

January 2010: $1,655.3 million
January 2009: $1,928.3 million

December 2009: $1,653.1 million
December 2008: $1,869.4 million

November 2009: $1,696.9 million
November 2008: $1,983.1 million

October 2009: $1,517.9 million
October 2008: $1,739.8 million

Once again, unadjusted numbers vs. a year ago are the only valid way of looking at data. Same store sales, comparisons to projections, and non-seasonally adjusted comparisons to the previous month are all bogus comparisons.

Tennessee


January State Revenue: Sales Tax Still Down, But Not As Much
February 10, 2010

Finance Commissioner Dave Goetz said today that state revenue collections in January, which reflect December activity, are still running below budget expections and sales taxes collections have now shown "negative growth" for 20 consecutive months.

Still, Goetz told reporters that there are some slightly positive signs in the figures. For the first time in many months, the total Tennessee tax collections were actually a bit above the level of the prior month a year ago -- in this case, January of 2008.

Also, he says business tax collections are still running above expectations and sales taxes are not down as much as they have been. Car sales were up for the third consecutive month, for example.

"January is the 20th consecutive month in which sales taxes have recorded negative growth." Finance and Administration Commissioner Dave Goetz said.

"January collections represent December holiday sales, which brought reports of positive growth at the national level, so it's very disappointing that we didn't have a similar experience in Tennessee."
The sad state of affairs is US Government reporting is screwing up the minds of state commissioners like Dave Goetz led to believe their state did not have a "similar rise" in sales.

U.S. Sales Tax Collections

Sales tax collections rise in U.S. states: report
Jan 13, 2010

Sales tax revenues in U.S. states rose in December from their anemic state in November but are still far from returning to the levels seen in the middle of last decade, according to a report released on Wednesday.

More than a quarter of states in a survey conducted by economic newsletter The Liscio Report met or exceeded forecast sales tax collections, up from 18 percent in November.

In November, no state registered sales tax revenue growth over the year, but by December 13 percent enjoyed growth.
Notice the spin on the headline, comparing December to November, a bogus comparison because of Christmas.

Also note that only 13% of states are reporting growth which means that 87% of states have flat to declining sales. Amazingly the headline has a positive spin that revenues was up.

Even then, close observers will note that revenues were up vs. projections. That does not mean they were up at all. That was very sloppy reporting, at best.

Alabama

Alabama tax collections back down for state education, general funds
February 02, 2010

Taxes collected by the state Education Trust Fund continue to jump around from month to month, with tax collections in January dropping 17.5 percent, or $80.7 million, compared to January 2009, the state finance department reported Monday.

That followed a gain of 13.5 percent in December compared to December 2008 and a drop of 6.7 percent in November compared to November 2008.

Overall, taxes collected by the trust fund, the main source of state tax dollars for public schools, colleges and universities, totaled $1.364 billion in November through January, down $58.7 million, or 4.1 percent, compared to the same period a year before.

Net personal and corporate income taxes in those three months totaled $807 million, a drop of $41.1 million, or 4.9 percent, compared to the same period a year before.

Net sales tax collections for the trust fund in those three months totaled $367.5 million, a drop of $4.9 million, or 1.3 percent, compared to the same period a year before.
Georgia

State Tax Collections Down Again

February 10, 2010

It was another tough month for Georgia revenue collections. Governor Sonny Perdue’s office says for the month of January, collections dipped 8.7 percent from the same month a year earlier. That now makes it 14 straight months of declining tax revenue.

For the fiscal year ending June 30th, revenues are down almost 13 percent.
The 31 retailers file for bankruptcy in 2009

  • Penn Traffic:11/18
  • Hackett's Department Store: 11/10
  • InkStop: 10/1
  • Sacino & Sons: 9/11
  • Samsonite: 9/2
  • Escada: 8/13
  • Finlay: 8/5
  • Bashas: 7/12
  • Crabtree & Evelyn: 7/1.
  • Best & Co: 6/26
  • Eddie Bauer: 6/17
  • Arcandor: 6/9
  • Oilily: 5/28
  • Anchor Blue: 5/28
  • Door Store: 5/27
  • Filene's Basement: 5/4
  • Bi-Lo: 4/19
  • Z Gallerie: 4/10
  • Ultra Jewelry: 4/9
  • Big 10 Tires: 4/2
  • Zounds Hearing Aid Centers:3/30
  • Al Baskin Co: 3/23
  • Drug Fair: 3/18
  • Strasburg-Jarvis: 3/11
  • Joe's Sports & Outdoor Stores: 3/4
  • Everything but Water: 2/25
  • Ritz Camera; 2/22
  • S&K Famous Brand: 2/9
  • Fortunoff: 2/5
  • Bruno's Supermarkets: 2/5
  • Gottschalks: 1/14

The above list thanks to: Retail Insights

Some of those stores may still be in business. However, those chains that are still in business closed many poorly performing stores, boosting same store sales figures in the remaining stores.

Distortions In Same Store Sales


Ann Taylor: The women's apparel chain has increased the number of stores it will close this year to 163 from 117 as part of its cost-cutting program to save $125 million over the three years ending in January 2011.

Finlay: The jeweler filed for Chapter 11 protection on August 6, 2009. It currently sells jewelry at about 77 department store locations and operates about 106 stand-alone jewelry stores as Bailey Banks & Biddle, Carlyle & Co Jewelers and L. Congress. The company listed assets and debt in the range of $500 million to $1 billion in its Chapter 11 filing.

Zales: Jeweler closed 118 underperforming stores in its fourth quarter, which ended July 31. Year to date for 2009, Zale has shut down 191 locations. Of the closings, 31 were kiosks and 160 were retail stores.

Kmart: Big box retailer plans to close three Detroit stores in Fall 2009 with liquidation sales beginning on August 30, 2009. According to Kmart spokeswoman Kimberly Freely, these locations will close due to "a number of factors," including poor sales performance or failure to negotiate favorable lease terms.

Retail Sales Up - Not

"Duane1X " on the Motley Fool did an excellent post about retail sales on December 17, 2009 called Retail Sales Up... NOT

Retail sales were not up then, and they are still not up now as recent data shows.

One final point. Sales taxes have gone up in many states, thus actual sales are even more depressed than appears at first glance.

No Need To Panic?

Texas sales tax collections are $1 billion behind
February 28, 2010

Four months into its new two-year budget, Texas already is nearly $1 billion behind its expected pace of sales tax collections, according to new figures released Friday.

Comptroller Susan Combs said there's no need for panic, as tax collections should start growing again in the first or second quarter of the year.

But the decline is dramatic. A year ago, Combs forecast essentially flat sales taxes receipts in the budget year that started Sept. 1; instead, they've decreased by 12.9 percent in the first four months.
There is every reason for states to panic. Expect nothing less than panic.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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