The Economy: Very Weak Data Continues to Roll In, Seasonal Conversions Cover Up Much of the Weakness

Retail sales:

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for June, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $442.0 billion, a decrease of 0.3 percent (±0.5%)* from the previous month, but up 1.4 percent (±0.9%) above June 2014. Total sales for the April 2015 through June 2015 period were up 1.7 percent (±0.7%) from the same period a year ago. The April 2015 to May 2015 percent change was revised from +1.2 percent (±0.5%) to +1.0 percent (±0.3%).

The detail is here. As usual, the seasonally adjusted numbers look more positive than you would expect them to be based on the weak underlying raw data.

Business Inventories:

Sales. The U.S. Census Bureau announced today that the combined value of distributive trade sales and manufacturers’ shipments for May, adjusted for seasonal and trading-day differences but not for price changes, was estimated at $1,323.6 billion, up 0.4 percent (±0.2%) from April 2015, but was down 2.2 percent (±0.4%) from May 2014.

Manufacturers’ and trade inventories, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $1,797.8 billion, up 0.3 percent (±0.1%) from April 2015 and were up 2.4 percent (±0.5%) from May 2014.

Sales are down, and inventories are up. That’s not a positive situation.

Also, the seasonal variance from the underlying reality is glaring, and ugly:

May is typically a stronger month for raw sales. During the previous four years, an average raw increase of 3.8 percent converted to an average seasonally adjusted increase of 0.2 percent. This year’s raw increase of less than 1 percent converted to +0.4 percent.

This year’s raw sales in May were 1.5 percent below the level of two years ago. This year’s seasonally adjusted sales were 1.9 percent higher than two years ago. How is that even possible?

We can argue all day long about whether the seasonal conversions were done correctly.

What we can’t argue about is whether the raw data is far worse than the seasonally converted data indicates. It is — much, much worse. The “Manufacturing and Trade” elements of the economy continue to be in a downward spiral.