Thursday, December 04, 2008

Underestimated Strength of The Economy?

The question is: How abnormal are these times?

A snapshot of a moving target is of limited use, but: Sales the day after Thanksgiving were 3% higher than last year. Over the weekend, 172 million people, shopping in stores and online, spent an average of $372.57, a 7.2% increase over a year ago, when 147 million shoppers spent $347.55 per person.

Is this evidence that the recent deleveraging of indebted households has breathed fresh life into personal consumption, which normally is 70% of economic activity? Is it evidence of underestimated strength of an economy in which more than 93% of those who want to work are employed, and more than 93% of mortgages are being paid on time? Is it evidence that Washington's jaw-dropping interventions with hundreds of billions of dollars are having their intended psychotherapeutic effects? How much is it evidence of the decline of the price of a gallon of regular gasoline from $4.10 in July to $1.81 today? Over a year, every 1 cent decline is a $1.5 billion saving to consumers.

~George Will

20 Comments:

At 12/04/2008 10:52 AM, Blogger Marko said...

I remember last year there were tons of articles claiming that black Friday was awful. I also remember digging a bit and finding that it was 8% better than the year before, but it was "awful" because the year before had been 8.5% better than the year before that. I would like to dig up some of those gloom and doom articles, but don't have the time. Probably happened every year Bush was pres.

Makes it seem like lots of the press really really want things to be bad. Eventually, you get a self fulfilling prophesy.

 
At 12/04/2008 10:58 AM, Anonymous Anonymous said...

Wal-Mart Sales Strong in November, but Most Retailers Slumped
By KEVIN KINGSBURY
Retailers reported some of the weakest sales figures in years for November, with many missing downbeat expectations, but Wal-Mart Stores Inc. continued its recent outperformance as it topped estimates on increased store traffic and transaction size.
Holiday Sales
November 2008 Sales: Sortable chart of chains' resultsWSJ Columnist's Holiday Picks: Bargains and SlurgesTech Gift Guide: Gadgets, games, handheldsHoliday Sales News Tracker: News and analysisHeard on the Runway: Fashion & TrendsComplete Coverage: Holiday shopping news, analysis, video, dataThe dour numbers, in part due to there being one fewer week of post-Thanksgiving days in the November reporting period this year compared with 2007, comes as the country's recession enters its second year amid falling demand. Consumer spending dropped by the biggest amount in the third quarter in 28 years and the woes are expected to continue this holiday season, making it one of the worst in years.

 
At 12/04/2008 11:05 AM, Blogger Bill said...

This comment has been removed by the author.

 
At 12/04/2008 11:07 AM, Blogger Bill said...

The math here doesn't seem to make sense.

Statement 1a; 2008 Black Friday sales are 3% higher than 2007
Statement 1b; 2008 Thanksgiving weekend sales are 7.2% higher than 2007

Statement 2a; 2007 sales; 147 million shoppers; $347.55 per person
Statement 2b; 2008 sales; 172 million shoppers; $372.57 per person

Based on statement 2a & b.
2007 sales were $51.1B
2008 sales were $64.1B

This would make 2008 a 25% increase over 2007.

 
At 12/04/2008 12:00 PM, Blogger MikeJ said...

Retailers' November same-store sales results have been rather paltry, with few exceptions. Target (TGT) reported comparable sales dropped 10.4%. Macy's (M) reported a 13.3% drop in comparables. Nordstrom (JWN) saw same-store sales slide 15.9%. Kohl's (KSS) reported a 17.5% slump in comparables. JC Penney (JCP) posted a drop of 11.9% for same-store sales. TJX Companies (TJX) reported a 12.0% drop in same-store sales. Meanwhile, BJ's Wholesale (BJ) saw same-store sales increase 6.2%. Wal-Mart (WMT) reported a 3.4% increase in comparables. -yahoo finance

 
At 12/04/2008 12:22 PM, Anonymous Anonymous said...

Economy is not strong

- job losses are just starting
- consumption this week was propped up by unprecedented sales/mark downs
- housing will continue downward another 10% and may overshoot (cap rates on commercial signal all equity will be wiped out on leveraged purchases in 06-08)
- Defaults on RE, coroprate debt and residential will continue to increase
- savings rate for U.S. consumers will increase (finally)
- credit will remain tight
- de-leveraging will not increase the value of assets; recovery will not be a return to the last few years. recovery will mean stabilization not recovery (confusing, sorry)
- equities are cheap if earnings are estimated correctly (they are not)
- some debt is mispriced
- commodities will rebound (oil and gas below marginal cost of prodution) but who knows when
- emerging markets are fragile but still growing

 
At 12/04/2008 1:01 PM, Anonymous Anonymous said...

Hey Bill, the 7.2% is based upon the per person increase.

(372.57-347.55)/347.55 = 7.2%

 
At 12/04/2008 1:02 PM, Anonymous Fred said...

Great set of predictions, anonomous. It is courageous of you to stake your name and reputation on them. Oh wait...

 
At 12/04/2008 1:47 PM, Blogger bobble said...

there's no way to spin this positively. the world economy is in dire staits. no country has decoupled:

global manufacturing pmi

global services pmi

 
At 12/04/2008 1:59 PM, Anonymous Anonymous said...

"Great set of predictions, anonomous. It is courageous of you to stake your name and reputation on them. Oh wait..."

Do you take issue with any of my "predictions"?

-Jon Avorne

 
At 12/04/2008 2:24 PM, Anonymous Machiavelli999 said...

Mark do you care to make a wager. Or for that matter anyone else who supports Mark's polyannish views?

$100 bucks that we have 10% unemployment by July. Any takers?

 
At 12/04/2008 2:55 PM, Blogger 1 said...

"$100 bucks that we have 10% unemployment by July. Any takers?"...

Well that's like predicting the sun rising in the east...

Obama is President now...

 
At 12/04/2008 3:14 PM, Blogger wcw said...

On-topic, George Will is a turnip. Every time he writes about a subject I know, he's wrong, in a small or large way. This time, he's wrong in a large way: the economy is punk, in a way the numbers only begin to do justice.

Off-topic, I like most of Jon's predictions. Job losses are just starting; this is a recession, and an ugly one already. Housing will continue downward, though whether that's 5% or 15% in real terms is anyone's guess. Defaults will continue to increase (it's a recession, after all). Savings rates will continue to increase. Credit will remain tight, so long as by that you mean "tight" and not "as tight as at the worst of the credit freeze."

The point on deleveraging is weak, though I might agree with what I suspect he's saying. Maybe. And saying commodities will rebound is small beer, since the prices of wasting fuel assets always eventually rebound.

Still, about a dozen times smarter than George Will, but what root vegetable isn't?

 
At 12/04/2008 4:33 PM, Blogger misterjosh said...

Maybe all the people NOT buying cars are buying Christmas presents instead.

 
At 12/04/2008 4:43 PM, Blogger 1 said...

"On-topic, George Will is a turnip. Every time he writes about a subject I know, he's wrong, in a small or large way"...

Hmmm, sounds like a scathing indictmet of what you thought you knew but don't actually know west coast whiner...

 
At 12/04/2008 5:16 PM, Blogger wcw said...

1, are you defending Will here?

 
At 12/04/2008 6:01 PM, Blogger QT said...

A little light humor about the dismal science

 
At 12/05/2008 12:31 AM, Blogger OBloodyHell said...

> Wal-Mart Sales Strong in November, but Most Retailers Slumped

To paraphrase the movie Demolition Man, regarding restaurants...

"In the future, all stores will be Wal-Mart"

 
At 12/05/2008 12:34 AM, Blogger OBloodyHell said...

>>>> "$100 bucks that we have 10% unemployment by July. Any takers?"...

> Obama is President now...

Ya beat me to it.


Just think, though -- we're due for a replay in 2017, when all the entitlement shit starts to go down.

What fun!

 
At 12/05/2008 8:57 AM, Blogger MikeJ said...

"November nonfarm payrolls fell 533,000, which was a steeper decline than the drop of 335,000 that was widely expected. "

We are getting closer.

"Underestimated Strength of The Economy?"

seriously?

 

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