Retail Trade Report for December-2021

 

The Census Bureau released the advance data for December Retail. Last month the October number was revised up a tad, but this month it was revised down a tad and the November was revised down as well. Basically, this blunted the -1.9% fall in December Sales on an adjusted basis.

Furniture and Home Furnishings (-5.52%, -689M), followed by Clothing and Apparel (-3.06%, -824M), then Electronics and Appliances (-2.94%, -224M). It is no surprise that Department stores were (-6.95%, -817M) for the month.

Now for the eye opener... Non Store retailers, which includes Electronic Shopping and Mail order... (-8.7%, -7,867M)

Now for the stuff this ole Hillbilly can't fathom.

Headlines say Omicron was a factor and I would tend to agree, but the Electronic Shopping and Mail order segment would seem to benefit... but it didn't.

Supply Chain problems do exist, but with the Business and Wholesale Inventories up through November, I would have thought December would have been better.

Labor shortages, due to Covid... possibly, but hard to grasp how, considering the industries being impacted, etc. 

Then there is the major difference in unadjusted and adjusted, with the unadjusted indicating the opposite of what is possibly happening... 

Adjustment of estimates is an approximation based on current and past experiences. Therefore the adjustments could become less precise if current competitive pressures, changes in consumer buying patterns during holiday periods, and other elements introduce significant changes in seasonal, trading-day and holiday patterns.

Would Omicron/Covid have affected consumer buying patterns? 

Clearly, I am not a rocket scientist, so what do I know? However, I can speculate, opine/whine, etc. 

One year ago, the vaccine was being rolled out, the news was upbeat, inflation was tame, with those small stimulus checks rolling out in January... yet the February numbers lagged, as it was winter after all, until the big stimulus kicked in, and of course inflation followed. But the joy was everywhere, the end was in sight, the good ole days were almost here again.

1 year later and we don't have a lot of upbeat news and actually quite the contrary, no stimulus checks, inflation is running hot, but not enough to warm the weather. The supply chain is still snarled, covid is threatening to make it worse amongst our trading partners... etc. etc. Geo-politics is looking very unhealthy.

AND... if we haven't gotten sick by or of - Covid, it is an election year. So don't expect any help from D.C. - on anything. But you knew that already... or should have.

 

Producer Price Index for December 2021

 

The Producer Price Index as released by the BLS, this A.M. 

The Producer Price Index for final demand increased 0.2 percent in December, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This rise followed advances of 1.0 percent in November and 0.6 percent in October. On an unadjusted basis, final demand prices moved up 9.7 percent in 2021, the largest calendar-year increase since data were first calculated in 2010. 

In December, the advance in the final demand index can be traced to a 0.5-percent increase in prices for final demand services. Conversely, the index for final demand goods decreased 0.4 percent. 

An ever so slight easing, imo, for the upstream inflation. As always, this is backward looking data and does not forecast what might happen in the future. 

The retail report tomorrow, while also backward looking, could provide some indication of future activity.

Breakdown of CPI DATA and Real Earnings, December, 2021

 

The BLS report for December, Indicated a 7.0% yoy inflation rate with the month on month being 0.3% unadjusted of 0.5% after adjustments.

With this release comes a variety of other numbers...

I am at the 5.0% annual rate...

I had a better than expected outlook for my personal rate of inflation, but this continues to be due to medical costs rising at a much slower rate than everything else, AND at a slower rate than in recent years. I just cannot be so optimistic as to call this a long term trend.

I had previously forecast...December is likely to be between that 6.98% and 7.16%.

The likelihood of January's numbers falling between 7.04% and 7.40% are fairly high at this point. While there was joy in the easing of energy prices, not sure the rough patch of weather in the next 2 weeks will not negate some of that joy. For comparison... June 1982 was 7.06% and then February 1982 was 7.62% and January 1982 at 8.39%. I throw that out as we heard highest inflation in nearly 40 years for last month and again for this month. Also, for the record, that 7.62% (2-1982) was the lowest rate since June of 1978.  

Also, beef prices are easing a bit, but Covid may mess up the work force in that category. In any case, the month to month changes will be the real guide going forward, as YOY increases might start to ease. Not that inflation is easing, but January 2021 saw inflation percolating and then lifting off in February. 

Historically, the June 1982 YOY inflation was pegged at 7.06%, compared to last months 7.04%. From there it is February 1982's 7.62%. Next month's headline will be highest inflation in nearly 40 years.

On to Real Earnings...

Basically the report indicates wages are keeping up with inflation on month to month, but still below the recent peak of September.

Political Prognosticating

 

via GIPHY

It is important to stir the pot, as well as smoke it. Although I suspect a lot of pot has already been smoked.

Never the less, it is time for me to review the current state of the 2024 presidential election and to properly undertake that assignment, I must review a bit of history.

Throughout my lifetime, there were always those that were strictly far right or far left. A lot of us were caught in the middle. Generally speaking, we decided the election on which candidate was least objectionable. Somehow that seemed to change, going into the 2016 election. Granted, you might say it was earlier, but never was there such a hue and cry as after the 2016 election. Even the 2000 election was somewhat settled amicably. At the most, it was not long for those protesting to fall back into the shadows. If you say 2008 and the tea party, it hasn't really had an impact... other than to taint future republican candidates, and a renewed distaste for a certain democrat.

2016 was as much about not electing Clinton, as anything else. Trump won by 304-227-7 over Clinton. If Clinton had gotten 44,285 more votes in Pennsylvania, it would have been 284-247-7 for Trump. AND if Clinton had gotten 10,705 more votes in Michigan, it would have been 267-263-4 for Trump. AND if Clinton had gotten 22,749 more in votes in Wisconsin, it would have been 273-257-4 for Clinton. A total of 77,739. Granted Clinton had more popular votes, but the elections are decided by electoral votes. If 38,870 voters in those 3 states had voted the opposite... the results would have been different.

So 2020 was about not re-electing Trump. Biden won 306-232. If Trump had gotten 10,458 more votes in Arizona, it would have been 295-243 in favor of Biden. AND if Trump had gotten 11,780 more votes in Georgia, it would have been 279-259, still in favor of Biden. And if 20,683 more votes in Wisconsin had voted in favor of Trump... We would have deadlocked at 269-269. Which would have ended up in Congress, which would likely have resulted in Trump being re-elected, due to the structure of the Constitution surrounding such a matter. If 21,438 voters in those 3 states had voted opposite, the result would have been different.

So forget about the 7M popular vote difference in 2020 or the near 3M popular vote difference in 2016. It really only takes a small swing in critical areas to make a YUGE difference, imo.

Therefore 2024 will hinge on such small swings. There seems to be a lot of glee from the right about the "troubles" of Biden, which in turn means they think he can be beat in 2024 by any Republican. Therefore it would seem almost certain that Trump would take another whack at the Presidency. 

However, I don't think Biden will even attempt to run for re-election in 2024. Harris might give a try, but will fail miserably. That in itself would seem to sabotage the Trump candidacy. If anybody could beat Biden or Harris, then what would be the point of risking a repeat of 2020... when anybody would be better than Trump. 

Been there and done that.

Social Security is Being Robbed?

Courtesy of Freepik.com

Bear with me...

You go to the bank and open up an interest bearing checking account. You deposit $500 and throughout the following month, write checks for $1,250, while depositing another $1,500. At the end of the month, there is $750 in that account. The bank pays you interest on that amount. This repeats month after month.

I hope you are not one of those people that think the money you put in is just sitting there and collecting interest. It is NOT. The bank pays you interest to use your money to facilitate loans, etc. Things that would give the bank a means to make money and in return... pay interest. THAT bank account is what the bank will back, if you ever need to withdraw its entirety.

The Federal Government has something similar called Reserve Accounts. There are dozens of these reserve accounts and the OAS Trust Fund (what we commonly refer to as THE social security trust) as well as DI (the social security disability trust)... so on and so on. 

It is called a trust fund due to the Constitution. 

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

Basically it says that taxing the general public for benefit of one group is not constitutional. Hence the bookkeeping around the whole matter. It was a workaround to avoid constitutional challenges of the act. And constitutional challenges in the 1930s was a fixture during FDR's early years... which led to an attempt to pack the court. 

I'm not real sure how or why many people think the trust fund has been robbed, etc. While there has been some changes over the years, the trust fund is set up exactly as it was in the beginning... 1935.

Hence the phrasing of the original act... 

An act to provide for the general welfare by establishing a system of Federal old-age benefits

Here is the original Social Security Act. The above is the preamble. Note the number of "titles" in the act (11). The trust fund we are familiar with and the program most people think of in terms of Social Security is but one title. That would be Title II. 

There is hereby created an account in the Treasury of the United States to be known as the Old-Age Reserve Account hereinafter in this title called the Account.

It details how it would be collected, spent, interest paid etc. The only change is how the accounting of the trust funds, relative to the overall budge. For awhile, it was treated separately, but currently is counted together, as far as national debt. Note: intragovernmental holdings would include all trust funds, which are many, and would include OAS, DI, and Medicare A.

Actually, the fractional reserve monetary system is the monetary system used by banks, the fed, etc. There is a school of thought that this should considered theft. However, can we really call something theft if we agree to collect interest and have the federal government guaranteeing our deposits?

It has been getting interest since day one. Without that interest, the trust fund (OAS) would be more in the order of $500B, rather than the current $2.8T. When you think about, if there were a balanced budget excluding Social Security (OAS) revenue, would there be a need to pay interest? The interest accrued is likely tied to the 10 Year Note, as it historically has nearly matched that rate.

Whether you think it has been robbed or not, that $2.8T is the current balance and as more people retire and draw from that trust and outstrips the revenue... that balance will fall, just like that interest bearing checking account. Added into the equation is interest paid is falling as interest rates have fallen.

Doing nothing guarantees the fund will finally hit zero in the 2030s. And just as you would with that interest bearing checking account you have at the bank... you will start delaying payments until the money is the bank, to back that payment. It will not go bankrupt, but simply be arrears in payments. Yes, people and companies can go or be forced into bankruptcy, which is the inability to pay creditors. We the People are both creditors and debtors in this instance. We gonna sue ourselves?

For Social Security (OAS), this would result that monthly check getting delayed by a couple of weeks each month, until the checks are behind about 3 months in the first year. That continues until the revenue returns to match the outgo. Then there is the matter of revenue being enough to catch up on all those delayed checks.

So when you hear someone throwing a hissy fit about proposals regarding saving Social Security (OAS) and then proclaim there is/would be nothing wrong if the government hadn't robbed it, they are to put it delicately... stupid.

The argument being put forth would be similar to someone screaming there is/was nothing wrong with their dwindling bank account if the bank hadn't robbed them. How else can that be anything but... stupid. The alternative would be to have the bank charge YOU a fee for holding that money in a vault OR you could stuff it under the mattress.

November PCE, 12-23-2021

 

The Commerce Department released the latest CPE information. This concludes the inflation information that I track... for the month of November. 5.7% PCE; PCE EX-F&E at 4.7% and trimmed mean PCE at 3.5%. All numbers are above October data.

There is really no surprise, and the latest numbers simply affirm what is already widely known, so has been rather mildly reported. Especially the relationship between PCE and the Federal Reserve's reliance on that information.

The FED has already mentioned what they might do, but haven't done anything, other than reducing bond buying... which is the key point. 

As for me, the MPI is my gauge and I suspect it will go up for the December report to about 5.1% annual and 0.4% on the month.

Forecasts for CPI-U range from -0.3% to +0.4% for December and year to year between 6.7% and 7.1%. I suspect we are nearing the end of peak y/y numbers and should look closer at month to month in the upcoming reports.

OMICRON

Omicron is spreading very fast, according to news and data sites. While it appears to be much less severe than previous covid variants, the current CDC protocols for medical staff is quarantining for 7 days from testing positive from covid... any covid, mild or not. Considering how pervasive the omicron variant is, and the apparent weakness of vaccines and prior covid immunity are to the omicron variant, the likelihood of much higher infection rates exists. This would include the medical community.

As with any virus, certain portions of the population are more susceptible to serious illness and death and would require medical attention. Medical attention that might be restricted by its own members infections and requirement to quarantine.

The timing for getting sick and seeking medical attention might not be as good as current. Then think about all the various companies, schools, etc. that require testing and adhering to various protocols. Think about the grocery stores that look warily on employees sniffling and sneezing. 

Just sayin..

Odd and interesting things found on the internet.

My reading list needs to be trimmed...

One website had a thread complaining about what to do with a narcissist. There were multiple people weighing in with advice... (narcissists?)

Clearly some threads are simply a mundane idea that has popped into someone's head. (Narcissism?)

Multiple threads purporting to be about facts, that degenerate into myths and urban legends. Is it intentional?

In that same theme... Quotes of the day, which should be relabeled as MIS-quotes of the day.

Some folks, apparently, prefer to ask questions on social media about their medications, which could be obtained by reading the literature that is already available. Reading is reading... smh!

Ran across a piece regarding Fruitcakes! No, not us internet denizens but rather the actual fruitcake... The magnificent history of the maligned and misunderstood fruitcake. For me it was a fun read and not my usual material. But education comes in all forms. 

A few thoughts on Omicron. It was first detected in South Africa, where several cases were among 35~39 years of age and the symptoms were mild. Sounds good, but I wondered about some of the other statements. 

While South Africa has a poor vaccination rate, the general belief is the rest of the population has probably had covid. Which led me to wonder why their death rate was ranked 55th in the world. Turns out they have an average age of 27 and only 5.5% of the population is above 60, which seem to be the prime age group for severe cases and deaths. When adjusting the death rate to the USA's 16.5% of population in that age group... the ranking might be closer to #2, just behind Peru.

There is also the matter of cases being "mild" among that 35~39-year-old age group already infected. What is mild? Would the older age groups also be mild? IF South Africa is either vaccinated or had covid, then Omicron can overcome the vaccine and/or immunity from previous infection. 

A lot more questions, than answers at this point. In any case, I am certainly maintaining the hermit lifestyle I have adopted. I do wonder about the almost guaranteed potential wave of cases upon the working folks and how that might impact industry output, etc. 

Even with hermit lifestyle, I cannot avoid such impacts and need to prepare quickly... on top of might current preparations. 

And yes, I will likely pay more as inflation is going to continue the upward trend. I lot of folks are saying this and that about the FED, and the Fed has been banging the drums. Yet the FED has done nothing and clearly is waiting on inflation to taper, prior to doing anything meaningful, imo. Also in my opinion, the FED is at least 6 months behind on tightening and possibly 9+ months. Tightening should be done when growth is heating up, not when it begins to slow, and I think that will likely start at the first of the year. 

I might be wrong and certainly hope I am, but it seems the "good" news has to be viewed as suspect, much like the "bad" news. 

Finally, there is the "logic" being used. According to one internet sleuth, "we have tried masking, vaccinations, shutdowns, and social distancing... and none of it has worked, so anyone with basic logic skills should recognize none of it is working and should be ignored." 

It is sad that something akin to this is passed of as a logical deduction! It's a sad world that accepts this type of irrational thinking.

We have tried to get people to mask universally, but with limited success and strong resistance; we have tried to fully vaccinate people, but with very limited success; We have tried shutdowns in some areas, but only for short periods and thus with very limited success; and finally... social distancing was never really practiced in most places. So, to form some logical conclusion from any of this is rather idiotic. 

But we see evidence every day, as to how irrational the world has become. That is the sad reality.