Retail Sales Continue to Contract in February – Worst Run Since Lehman

Retail sales string together worst print series since Lehman crisis.

Bullion.Directory precious metals analysis 12 March, 2015
By Christopher Lemieux
Senior Analyst at Bullion.Directory; Senior FX and Commodities Analyst at FX Analytics

For the last year or so, I’ve been proclaiming that it was beginning to feel like 2008 all over again. It started with hysteria-like bullishness in risk assets and malinvestment that was spurred by the Federal Reserve’s quantitative easing program.

Money was put into the stock market, not invested into true economic growth.

Then, market internals began to diverge from this bullishness, and the dollar strengthened much like it did prior to the Great Recession. This caused inflation projections by the Fed to become stifled and commodity prices to collapse.

The Fed said consumers are stronger. The TV pundits said consumers are stronger.

Albeit the strong headline non-farm payroll numbers or low gas prices, consumers just are not spending.

December through February has now become the worst string of consumer spending data since the Lehman Brothers crisis.

Last month, consumer spending contracted .6 percent, well below economists’ optimistic forecasts of .3 percent. This follows a .8 and .9 percent contraction in January and December, respectively. Economists continue to be misguided, as weather is the seasonal scapegoat. Sure, it snowed a lot in Boston but not so much out West.

Unseasonably cold weather may have adversely impacted discretionary spending and therefore weighed on Feb #retailsales.

— Joseph A. LaVorgna (@Lavorgnanomics) March 11, 2015

The fact is, Americans are not spending like they did prior to the Great Recession, where the personal saving rate dipped as low as 1.5 percent. What the Fed and academics alike have not seemed to figure out is consumers were levered up to their eyeballs in debt, and, unlike the US, they cannot sell bonds to China. Debt restructuring and repayment had to be done.

The Fed seemed to be unprepared for this, and it is a primary reason why QE is a failure. Americans used ZIRP to reduce debt, not expand it.

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