09/15/09 Baltimore, Maryland
Amazing. A few weeks of “Cash for Clunkers”…700,000 new cars off the lot…et voila: Retail sales jumped in August by the most in three years! Wee-hoo!
This morning’s Commerce Department release of +2.7% places August retail sales well ahead of the 1.9% “expert” consensus.
Great. Now that they’ve “pulled forward” car sales for the next 12 months…what’s next? How about… Appliances!?
Later this fall, Uncle Sam will being doling out up to $200 a pop (in borrowed money) to anyone who wants to replace an old appliance. Yeah, that’ll keep retail and GDP stats humming along.
Wholesales prices rose last month twice as much as forecast…thanks largely to rising gasoline prices. The 1.7% jump in August followed a 0.9% decline in July.
“Core” PPI excluding food and energy rose a more modest 0.2%. But that was also double analysts’ expectations. Turns out a good amount of that was driven by higher prices for cars and trucks, too. Whaddya know… “Cash for Clunkers” gave automakers an excuse to cut back on factory-to-dealer incentives.
Dealers don’t experience a squeeze without passing the costs along to customers. Which should make tomorrow’s release of the consumer price index (CPI), well, interesting too. The consensus says a 0.3% increase. We’ll see what tomorrow brings.
Addison Wiggin
Addison Wiggin is the executive publisher of Agora Financial, LLC, a fiercely independent economic forecasting and financial research firm. He’s the creator and editorial director of Agora Financial’s daily 5 Min. Forecast and editorial director of The Daily Reckoning. Wiggin is the founder of Agora Entertainment, executive producer and co-writer of I.O.U.S.A., which was nominated for the Grand Jury Prize at the 2008 Sundance Film Festival, the 2009 Critics Choice Award for Best Documentary Feature, and was also shortlisted for a 2009 Academy Award. He is the author of the companion book of the film I.O.U.S.A.and his second edition of The Demise of the Dollar… and Why it’s Even Better for Your Investments was just fully revised and updated. Wiggin is a three-time New York Times best-selling author whose work has been recognized by The New York Times Magazine, The Economist, Worth, The New York Times, The Washington Post as well as major network news programs. He also co-authored international bestsellers Financial Reckoning Day and Empire of Debt with Bill Bonner.
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It’s good news. Period. Retail sales ex-auto were up, not down. Why don’t you look at the entire picture. Sorry if it ruins your gloomy parade.
It is good news for some but bad news for others down the road. Robbing peter to pay paul to temporarily stimulate demand in some area forces purchase of items that are not wanted under current conditions. At best, if we are lucky and this is an economic low it may have provided a soft landing before going up. But if this is not an economic low then people paid too high a price and may risk default and taxpayers are on the hook for part of it for no good reason.
Government interference caused the problem in the first place and it will be a stroke of good luck if more interference fixes things.