Retail Trade Still Holding Up, In Many Areas, But Not All

ADVANCE MONTHLY SALES FOR RETAIL AND FOOD SERVICES, OCTOBER 2022

Advance estimates of U.S. retail and food services sales for October 2022, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $694.5 billion, up 1.3 percent (±0.5 percent) from the previous month, and 8.3 percent (±0.7 percent) above October 2021. Total sales for the August 2022 through October 2022 period were up 8.9 percent (±0.5 percent) from the same period a year ago. The August 2022 to September 2022 percent change was unrevised from virtually unchanged (±0.2 percent)*.

Retail trade sales were up 1.2 percent (±0.5 percent) from September 2022, and up 7.5 percent (±0.7 percent) above last year. Gasoline stations were up 17.8 percent (±1.6 percent) from October 2021, while food services and drinking places were up 14.1 percent (±3.2 percent) from last year.

Winners were broad based, but there were some losers, as in reduced sales in constant dollars...

• Department Stores
• Sporting goods, hobby, musical instrument, & book stores
• Electronics & appliance stores
• Clothing & clothing accessories stores

There was one, that did not keep pace with inflation, or slipped in "real" dollars.

• Miscellaneous store retailers

Not sure how the consumer is managing to keep up this pace of spending, which is at the February ~ April 2022 pace in "real" dollars. (Still not at the level of March ~ April 2021, in "real" dollars).

I can only speculate that consumers are going credit crazy. I have thought that for awhile and keep expecting the consumer to slow purchasing, as interest rates are edging up. 

I guess that whole "buy now, pay later" mantra hasn't gotten to the "later" part. 

Is PPI cooling for the Average Person? October 2022, PPI Release

The BLS has released the October Producer Price Index Report. (historical releases)

The Producer Price Index for final demand increased 0.2 percent in October, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices rose 0.2 percent in September and were unchanged in August. On an unadjusted basis, the index for final demand advanced 8.0 percent for the 12 months ended in October. 

You can read it all at the link, but this caught my eye...

Product detail: In October, 60 percent of the increase in prices for final demand goods is attributable to the index for gasoline, which rose 5.7 percent. Prices for diesel fuel, fresh and dry vegetables, residential electric power, chicken eggs, and oil field and gas field machinery also advanced. In contrast, the index for passenger cars declined 1.5 percent. (In accordance with usual practice, most new-model-year passenger cars and light motor trucks were introduced into the PPI in October. See Report on Quality Changes for 2023 Model Vehicles at www.bls.gov/web/ppi/ppimotveh.htm.) Prices for gas fuels and for processed young chickens also fell.

All in all a seemingly good report, as long as you avoid the food and energy section, and focus on services, which slid.

Just to clarify, a slowing of inflation does seem to be in the offing, but slowing does not mean reversal. Also, food and energy will still be an issue for us poorer folks through this winter. 

BRRR!

Natural Gas Stats Nov-11-2022

The weekly update from the EIA.

Working natural gas in storage in the Lower 48 states as of October 31, 2022, totaled 3,531 billion cubic feet (Bcf), according to month-ending estimates based on EIA’s Weekly Natural Gas Storage Report released November 10. This total is the second-lowest end-of-refill-season inventory level since 2008. Total inventory as of October 31 was 115 Bcf (3%) less than the five-year (2017–21) end-of-October average and 104 Bcf (3%) less than last year at this time.

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Overall at the mid range of 5 year average... the problem is in the East.

That would suggest some improvement. However, on a five year average...

Of course, this is the east, but not specifically the northeast, where the real problem seems to lie. There is a debate on how to handle this, but I lean toward this guy's idea. It is a 23 minute video, but seems to clear the air, on what is happening... and a potential solution. 

It should be noted, the dollar has sank about 6.7% from 6 weeks ago. The average annual household energy range for the U.K., back in July was £3,600~£5,400. It now stands at the £2,300~£2,950 range, so significant improvement, although a far cry from 2 years ago. Still that £2,500 cap, takes on a whole different look at this point in time. 

In the U.S., I would expect a 20% jump for households, on top of what is already in place.

CPI DATA and Real Earnings, November 2022

The BLS report was released this morning and it was a surprise. (historical releases) It came in substantially under the forecast by everyone.

My forecast from last month...

Oh yeah... next month CPI at 8.1%~8.2%, with m/m of +0.8%.

As you know by now...

The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.4 percent in October on a seasonally adjusted basis, the same increase as in September, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 7.7 percent before seasonal adjustment.

Of course, just as their is a silver lining inside every dark cloud, there can be a dark lining inside a silver cloud. Such as the month over month of July, at -0.01%; August at -0.04%; September at +0.22%; and this report (October) at +0.41%. Still not bad. 

My month over month was +0.08% and annual at 7.41% after last month's +0.33% mom and annual at 8.08%. For me, food somewhat decreased and medical stayed mostly flat. 

Hourly earnings have still not recover to pre-pandemic levels. Which is a nice way of saying wage inflation has not kept up with the CPI. Real Earnings

I over estimated inflation for October, so here is hoping I over shoot in November. Range of 7.6%~7.9%. Sure things are moderating, but can we count on further reductions in Electricity, Utility (piped) gas service, apparel, Used cars and trucks, and Medical Care services? 

Am I an optimist, pessimist, or realist?

What's Up With Diesel and Gasoline

The election might be over, but the vote counting, and arguing will continue... until the next election. In the meantime, energy prices will continue to hit the consumer pocketbook, with little to no relief in sight. [Data derived from EIA.GOV]

So, a review of a chart, I have published since August, 2006.

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Crude inventories are up 3.9M Barrels from last week, with Gasoline down 500K and distillates down 900K. Clearly there is enough Crude, but refiners are working at a fairly high rate... to export 3.5M barrels of gasoline more than imports, over the previous week. Same for distillates, with 7.8M barrels exported over imports.

I keep hearing about demand destruction in gasoline, and yes, it is much lower than one year ago. 

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However, based on a 12 year timeline... hard to discern.

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I would suggest that consumers are more mindful of gasoline prices and consumption, but are also being hammered by various other categories, such as food, which is not slowing in the upward trajectory and then there is the "core". You have to go back a number of years to see that core at current levels.

Now to the Northeast and distillate stocks...

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Not much in the way of improvement and actually a bit of slippage. It is not unusual to see the inventory this low in New England, at the tail end of the heating season, but never this low, at this time of season... dating back to records of November, 1990.

Personal Consumption Expenditures and Outlays Report - October 28th

The BEA released the Personal Income and Outlays, September 2022, this morning.

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Not real sure where the money for personal consumption expenditures is coming from, given the fall off of disposable income. Credit? Of course it is a factor, and not sure how resilient the consumer will be in the coming months, against higher interest rates.

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The pink is slowly receding from this chart, but that is more about base effects of Year over Year measurements. The Month on Month projections for October inflation are expected to be the highest... since June. 

Available stats for October would have gasoline rising +2.6%, after falling since June. According to my own personal expense tabulations... food sure isn't slowing. Of course the month is not over and something dramatic could happen to lower those two. It would take free giveaways of food and gasoline, which is not impossible... but highly improbable.

GDP Thoughts, Natural Gas Summary

Today, we were blessed with the Advance Estimate of 3rd Quarter GDP Release, from the BEA.

You can read the report and check the data. Here are some of my thoughts. I can clearly see the GDP in 2012 dollars, increased by $126.4B. The drag of our trade imbalance slid by -$156.5B. In other words... if the trade imbalance had remained steady, everything else was negative. Throw in the gain for consumer spending of +$59.5B and the everything else is very negative.

I am not exactly optimistic going forward and fail to see much to be enthusiastic in this report. The first and second quarter trade imbalance, which had jumped dramatically was a result of early ordering to ensure on time delivery and early ordering to beat the port strike, that never materialized. 

Not sure the consumer can continue to accelerate spending in the 4th quarter, as inflation headwinds are starting to seriously erode purchasing power. 

As for the impact on GDP by inflation...

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I read the term re-balancing being used for the big change in import/export numbers. That rebalance will be not be so prevalent in the 4th quarter. Which means the consumer needs to pick up the pace to have a positive 4th quarter. I cannot see that happening. Further I have previously stated the GDP numbers for 1st and 2nd quarters were badly distorted by the trade imbalance. 

Without the trade distortions, the 1st and 2nd quarter may have been positive and the 3rd quarter slightly negative, as in that much ballyhooed 1st of 2 consecutive quarters of GDP shrinkage.

On to natural gas, with today's update from EIA.GOV.

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Inventory is still improving and pricing is also showing some declines. The latter being a result of European facilities being nearly full and LNG tankers stacking up off shore of Spain, etc. 

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This trend will not continue, as we haven't gotten to cold weather. Europe will need to be refilled for the following winter, which means another round of upward prices. Add in the addition of LNG facilities on both sides of the Atlantic, as well as many more LNG carriers... the price hikes could be steep on the USA side, although some abatement in Europe.