Retail Sales, Factory Declines Point to Slowing Economy November retail sales fell 0.6% for the biggest decline this year, and manufacturing output had its first drop since June.
November retail sales fell 0.6% from the prior month for the biggest decline this year, the Commerce Department said Thursday. Budget-conscious shoppers pulled back sharply on holiday-related purchases, home projects and autos. Manufacturing output declined 0.6%, the first drop since June, the Fed said in a separate report. (…)
Shoppers spent less in November on holiday categories including electronics, clothing and sporting goods. Spending on autos and furniture also fell sharply, though gasoline sales fell slightly. The pullback occurred online and at department stores in a month that encompasses Thanksgiving, and Black Friday and Cyber Monday promotions.
Consumers, however, spent more on everyday items such as food and healthcare products. They also increased spending on restaurant meals, in a sign that demand for services remains strong despite rising prices.
Unlike many government reports, retail sales aren’t adjusted for inflation and can reflect price differences in addition to purchase totals.
Retail sales grew 6.5% in November compared with a year earlier, the slowest year-over-year growth since December 2020. It was also less than a 7.1% increase in the consumer-price index for the same period. (…)
The Commerce Department will release new household spending figures covering goods and services on Dec. 23. (…)
The household spending data is inflation adjusted. In the meantime, we can guess what the proper inflation rate is on retail sales.
Inflation rates currently vary significantly by categories. On a YoY basis, the November CPI was +7.1% in total but +10.6% for food-at-home, +10.1% for gasoline, +3.7% for core goods and +6.8% for services.
This chart illustrates the unusual divergences between YoY inflation on durables (yellow), nondurables (blue) and core CPI (black). Note also the continued close fit between core CPI and CPI-services (red) even while goods inflation (27% of core CPI) fluctuates enormously.
On a YoY basis, retail sales growth has been negative since March using the weighted CPI-durable and nondurable goods proxy (red).
Focusing on control retail sales (which exclude restaurants/bars, auto related and building materials), real growth has been negative since July 2021 even though Americans boosted their credit card balances (blue) 6.5% above their pre-pandemic levels since March 2022, this while aggregate payrolls rose 4.7%.
There is a strong possibility that many Americans are still revenge spending, perhaps taking advantage of inventory liquidation, and that they will seek to restore their finances in 2023, particularly given the economic slowdown, rising inflation on essentials and sharply rising interest rates on their boosted loans.
Were this to occur before the widely (wildly?) expected decline in inflation, the Fed will feel enormous pressure to pivot, something Powell has repeatedly said would not happen before the “job” gets done. The damage to corporate profits will nonetheless happen.
FYI, the most recent data from the Chase consumer card spending tracker suggests a very weak December so far (through December 11): “On December 11, our tracker of Chase consumer card spending was 3.6% below its pre-COVID trend.” Not inflation adjusted!
Jobless Claims Fell by 20,000 Last Week Proxy for layoffs hits lowest level since late September amid still-tight labor market
Initial jobless claims, a proxy for layoffs, fell by 20,000 to a seasonally adjusted 211,000 last week, the Labor Department said Thursday. Claims are up from lows this spring, but remain at levels that suggest many employers are holding tight to workers.
Last week’s claims count was below the 2019 weekly average of 218,000, when the labor market was also strong. The four-week moving average of weekly claims, which smooths out volatility, decreased by 3,000 to a seasonally adjusted 227,250.
Continuing claims, which reflect the number of people seeking ongoing unemployment benefits, ticked up by 1,000 to 1.67 million in the week ended Dec. 3. Continuing claims, while still low, have slowly climbed since mid-September. That could indicate some unemployed Americans are taking longer to find jobs. (…)
Investors See Fed Policy Mistake Driving Hard Landing, BofA Says
Investors are concerned that too much tightening from the Federal Reserve could trigger a hard economic landing next year, as the central bank continues its most aggressive rate hike campaign since the 1980s, according to strategists at Bank of America Corp.
That’s marked by a renewed selloff in equities, which is unlikely to end as long as the labor market remains hot, strategists led by Michael Hartnett wrote in a note. They said monetary policy could trigger a reversal in what they see as an “abnormally” low US unemployment rate. BofA also expects a credit event among non-bank lenders — so-called shadow banks — to mark the ultimate low point in stocks in 2023. (…)
Stocks Bulls Losing Support as $4 Trillion of Options Set to Expire
An estimated $4 trillion of options is expected to expire Friday in a monthly event that in tends to add turbulence to the trading day. This time, with the S&P 500 stuck for weeks within 100 points of 4,000, the sheer volume provides a positioning reset that could turbocharge market moves. Given the brutal backdrop that emerged in recent days, from a raft of rate hikes by global central banks to signs the American economy is starting to flag, worries are mounting the expiration will act as an air pocket. (…)
Commodity trading advisers, who place macro bets in the futures market, likely turned sellers as the S&P 500 dropped as much as 2.6% to 3,892, according to Nomura Securities International’s cross-asset strategist Charlie McElligott. The big money managers could be forced to drop their heretofore bullish posture and go as much as 83% short should the benchmark index close below 3,933, his model shows.
In a scenario where major stock benchmarks tumble 2%, these systemic funds may need to unload $30 billion of global stock futures, with roughly $11 billion coming from contracts linked to the S&P 500, McElligott estimates. (…)
The Firm That Vetted Binance’s Reserves Halts All Crypto Work The auditing firm has been at the forefront of the industry’s rush to conduct so-called “proof of reserves” reports.
Mazars Group, the accounting firm used by crypto giant Binance Holdings Ltd. and other big players in the industry to vouch for their assets held in reserve, has halted all work for crypto clients, dealing a major blow to an industry seeking to shore up confidence in the wake of FTX’s collapse.
The French firm suspended work for cryptocurrency firms because of indications that markets haven’t been reassured by the “proof-of-reserves” reports it had published so far, according to an email from the firm seen by Bloomberg News. The firm was also concerned about intense media scrutiny, the email said.
“Mazars has indicated that they will temporarily pause their work with all of their crypto clients globally,” a spokesperson for Binance said in a statement to Bloomberg News on Friday. “Unfortunately, this means that we will not be able to work with Mazars for the moment.” A Mazars spokesperson said the firm will issue a statement in due course, declining to comment further. (…)
Paris-headquartered Mazars has been at the forefront of the crypto industry’s rush to conduct proof-of-reserves reports for the likes of Binance and other large exchanges, including Crypto.com and Kucoin. A spokesperson for Crypto.com said it would “continue to engage with reputable audit firms in 2023,” while Kucoin didn’t immediately respond a request for comment. A website hosting Mazars’s reports for crypto clients is currently inactive. (…)
The Binance spokesperson said the exchange is exploring how it might provide additional transparency on its reserves in the coming months. (…)
“Many audit firms are scared to work with crypto businesses,” said Binance CEO Changpeng “CZ” Zhao in a Thursday interview on CNBC. When asked why Binance hasn’t engaged a Big Four auditor — a moniker that refers to the largest accountancy companies PwC, Deloitte, EY and KPMG — Zhao added that such firms “don’t even know how to audit crypto exchanges.” (…)
Rather inconvenient, well, maybe not for everybody…
The FT reminds us that
In a recent interview with CNBC, Binance’s chief executive Changpeng Zhao refused to confirm whether the exchange would be able to finance a potential $2.1bn clawback from FTX, in the event that funds were requested as part of FTX’s ongoing bankruptcy proceedings. “We are financially OK,” Zhao said, adding he would leave such issues to Binance’s lawyers. “I think our legal team is perfectly capable of handling it.
The “legal team” will handle it!!!
I have the nasty feeling that this slow moving accident is changing gear…
Reminder: Binance is the world’s largest crypto exchange.
Musk suspends US journalists’ Twitter accounts
Beijing death toll mounts as Covid sweeps through Chinese capital Official count shows no fatalities in weeks but bodies have been seen at hospitals and crematoria