Behind those retail numbers...

In yesterday's Daily Reckoning, Bill Bonner noted that retail sales rose in August — even as consumers are earning less and their homes are no longer rising in price.  So what gives?  Well, the New York Times went out and did some good old-fashioned reporting… and found the 2.9% year-over-year increase isn't all it's cracked up to be:

[C]hains like Wal-Mart Stores and Macy’s, which led the pack, have slashed prices and dangled large discounts to lure customers, which could hurt profits and mask troubles that might spill out during the crucial holiday season.

And two large states, Florida and Texas, pushed back the start of their school openings — and tax-free shopping days — by several weeks this year, inflating the August sales of teenage-oriented retailers like Abercrombie & Fitch and Aeropostale, analysts said.

We'll leave aside the question of why Florida never had a sales tax holiday when I lived there and note the pessimism of some retail execs who you'd ordinarily expect to blow sunshine to reporters:

“It will be tougher than it is now,” said Myron E. Ullman, chief executive of J.C. Penney, referring to shoppers’ anxiety about the economy. “I do not see anything on the horizon that will turn this around.”

The chief executive of Staples, Ronald L. Sargent, described himself as “nervous” about the holidays; “maybe cautious is the better word,” he said. “The economic forecast is causing people to delay buying what they can delay buying. They are not running out to get the latest all-in-one H.P. printer.”

Yes, the all-in-one H.P. printer they have now is doing just fine, thank you.  And as we noted here on Friday, even sales of that 21st Century icon of consumer excess, the big-screen TV, are starting to plateau.

But wait, there's more:

In a sign that consumer spending may be pinched, discounters rather than full-price chains reported the strongest performance in August. Sales at stores open at least a year, a standard measure in retailing, rose 6.1 percent at Target and 3.1 percent at Wal-Mart, both exceeding analysts’ predictions.

And the only reason Wal-Mart did so well was it marked down bedding, apparel, and towels.

On the other end of the scale, the luxury retailers continue to do just dandy — Nordstrom's up 6.6%, Saks up 18.2%.  More of that growing gap between the haves and have-nots brought about by what Bill Bonner calls "late-stage degenerate capitalism."

And as the middle class shrinks, so do sales at the mid-tier retailers:

The department store industry fared less well. Sales fell 4 percent at J. C. Penney, 5 percent at Dillard’s and 0.6 percent at Kohl’s. But when their performances for July and August, generally regarded as the back-to-school shopping period, are averaged, all three chains reported stronger figures.

Still, the August numbers by themselves can't be casually dismissed — and I find the Kohl's figures especially troubling.  Kohl's reputation is that it does well no matter how the economy's doing:  In good times, Wal-Mart shoppers trade up to Kohl's, and in bad times Nordstrom's shoppers trade down to Kohl's.  If Kohl's is sputtering, that says volumes about how the moneyed classes are holding up, while the middle classes are getting very itchy indeed about the economy and  what's happening to the prices of their homes.