Tuesday, July 15, 2008

June retail sales barely budge, while wholesale sales rise sharply.

A couple of quick stories to report here. First, let us go to Marketwatch, where June retail sales fizzle despite stimulus:

WASHINGTON (MarketWatch) - U.S. retail sales rose a disappointing 0.1% in June despite nearly $50 billion in stimulus checks for consumers, Commerce Department data released Tuesday revealed. Sales were boosted by higher prices for gasoline, food and other consumer goods. The figures are seasonally adjusted but are not adjusted for inflation. It was the weakest sales since February's 0.2% decline. Sales in June were held back by the biggest drop in auto sales in more than two years. By contrast, sales at the malls and shopping centers were relatively healthy, stimulated by the tax rebate checks, Excluding the 3.3% drop in auto sales, sales rose 0.8%, the slowest in three months.

Now let us go to this MSNBC story, reporting U.S. wholesale prices rose sharply in June:

WASHINGTON - Soaring costs for gasoline and food pushed inflation at the wholesale level up by a larger-than-expected amount in June, leaving inflation rising over the past year at the fastest pace in more than a quarter-century.

The Labor Department reported that wholesale prices jumped by 1.8 percent last month, the biggest one-month rise since last November. Over the past 12 months, wholesale prices are up 9.2 percent, the largest year-over-year surge since June 1981, another period when soaring energy costs were giving the country inflation pains.

Core inflation, which excludes energy and food, was better behaved in June, rising by just 0.2 percent, slightly lower than expectations.


For June, energy prices at the wholesale level shot up by 6 percent, as the price of gasoline surged by 9 percent following an even bigger 9.3 percent increase in May.

So what happened here? It would appear to me that inflation was pushing up the retail sales, as consumers are cutting back on their spending. American consumers are already being hurt by $4.00 a gallon gas prices, and those same high energy prices are being reflected in the high food prices due to increased transportation costs, or the greater share of corn being planted and used to produce ethanol. With the continuing housing problems, and potential high credit card debt, Americans are using their stimulus checks to pay down their debt, and not go out shopping like the Bush administration was hoping for. So consumer spending is remaining flat and whatever increases that are taking place are possibly the result of inflation due to high energy and food costs.

This is not a mental recession we are having here.

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