Retail Sales Plunge and Inventories Grow

This morning the release of retail sales was nothing short of a disaster.  While recent economic news has been ‘ok’, the retail sales numbers this morning are down right scary. Concurrently business inventories are at a level that are much too high.

Retail sales today were announced at down .3% month over month—the concensus was +.3%.  For the most part household related goods (i.e. furniture) were where the softness showed up the most with apparel and building materials also disappointing. Auto sales which are still strong overall fell 1.1% month to month.

At the same time inventories remain at high levels (relative to the last 4 -5 years).  Inventories are at a 1.36 times sales levels which is .07 above a year ago. While this seems small, it is only small in an economy that is growing at a decent clip (say above 2.5%). Any further softening in retail sales and/or increases in inventories are likely to increase the likelihood of layoffs ahead.

BUT, the markets say ‘party on’ as equities are up 1/2% on the lousy Greek ‘solution’ (I mean who is kidding who.  They remain totally bankrupt and have almost no likelihood of recovering in my lifetime).