That Christmas sales buzz

(9 am. – promoted by ek hornbeck)

  The one thing you can count on every year for Christmas season is hype. Every single year, no matter what the economy is actually doing, you will hear reports about a tremendous surge in shoppers on Black Friday.

  Why anyone in their right mind would go to a shopping mall on Black Friday is beyond my imagination. I would rather poke sharp objects in my eyes, but that’s just me.

 The hype that follows Christmas is generally less intense, but it’s still there.

 U.S. retailers ended up having a decent Christmas, with holiday sales at the high end of modest expectations as consumers let loose some pent up demand and retailers carefully managed inventories and promotions.

  Retail sales rose 3.4% in December from the year before, the Commerce Department said Thursday. Combined with a 0.9% gain in November, retail sales rose 2.3% to $509.3 billion year-over-year for the two-month holiday period, to $446.8 billion, the Commerce Department said.

 Really? Solid Christmas sales despite high unemployment, huh? Let’s examine those claims more closely.

The very next paragraph of that article says something slightly different.

  The National Retail Federation, which calculates its figures a bit differently, said retail sales during December and November increased 1.1% to $ 446.8 billion.

Note the chart.

 So not only does the actual retail stores say sales weren’t as strong as the Commerce Department reports, but that almost all of that sales increase comes from people paying more for gasoline that they needed to drive to and from the mall.

  That puts the report into a different light.

 Then there is the comparative issues. Retail sales from Christmas 2008 were a disaster of epic proportions.

 Retail sales tanked in December. A pathetic Christmas 2008 was followed by a worse one in 2009.

 “Retail sales fell in December as demand for autos, clothing and appliances all slipped, a disappointing finish to a year in which sales had the largest drop on record,” the Associated Press reported.

  “For the year, sales fell 6.2%, the biggest decline on records that go back to 1992. The only other year that annual sales fell was in 2008, when they slipped by 0.5%,” the Associated Press reported.

 Funny how the news can be reported in totally different ways using the exact same numbers, huh? Maybe it’s not just the bias of bloggers.

 It’s just speculation on my part, but maybe all those auto sales from the Cash4Klunkers and the HAMP program sucked up possible sales from the retail section of the economy.

 The real kicker from all this is that even the retail sales that was reported might have been just a big lie that retailers told to themselves. What do I mean by that?

 Fitch’s December Retail Credit Card Index results show that more than one in every eight dollars of receivables was written off as uncollectable during the November collection period on an annualized basis. Taken with the recent delinquency trends and Fitch’s expectation for unemployment, Fitch expects retail card chargeoffs to remain elevated throughout first half-2010.

  “We do not foresee any meaningful improvement in the retail card credit quality in the coming months,” said Managing Director Michael Dean. “U.S. consumers remain under stress on a number of fronts, most notably on the employment front, and retail card chargeoffs will continue to reflect those pressures.”

 One out of every eight dollars from those retail sales numbers from credit cards, a $65 Billion market, is fictional. The stores don’t expect to collect a dime from them, yet they are still chalked up as “sales”.

  This delinquency rate isn’t anywhere close to normal. It’s 42% above the historic average and 48% higher than the 2007 level.

 This is just me talking, but I think the model based on the Great American Consumer driving the world economy is broken. It will remain broken until the Great American Producer becomes a factor again.