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Rising Prices, Weather Drive Retail Sales

On March 13, 2012, in Economy, by Tim

The Commerce Department reported(.pdf) that big increases in gasoline station sales and automobile sales drove overall retail sales in the U.S. higher by 1.1 percent in February following an upwardly revised gain of 0.6 percent in January.

Excluding motor vehicles, retail sales rose 0.9 percent last month and, excluding both autos and gasoline, sales rose just 0.6 percent.

Surging pump prices more than offset falling demand as gasoline station sales jumped 3.3 percent in February after an increase of 1.9 percent the month prior. Motor vehicle sales rose 1.6 percent last month following a decline of 1.6 percent in January.

February Retail Sales

Clothing sales rose 1.8 percent, however, here too, rising prices played a significant role in the sales gains as the Labor Department recently reported that, over the last three months, the cost of apparel has been rising at an annual rate of more than 5 percent.

An unusually warm and dry winter has also spurred many purchases at home improvement stores, as sale there rose 1.4 percent for the second month in a row. Recall that the retail sales figures are adjusted for seasonal variations and holidays, but not rising prices, all of which makes the February surge less than what it appears.

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It’s Official: Iran to Accept Gold for Oil

On February 29, 2012, in Commodities, by Tim

I’ve never been a big believer in the idea that the world’s increasingly shaky monetary system will someday be replaced by some sort of new gold standard (that would be a huge admission of failure by the world’s plutocrats and some form of global money based on a basket of commodities and national currencies – that the world’s plutocrats would also control – is much more likely), but, if a gold standard does return, we’ll all probably look back at today’s news that Iran is now accepting gold in exchange for its oil as an important development in that process. The BBC filed this report on the subject earlier today:

Iran is to accept gold instead of dollars as payment for its oil, the country’s state news agency has said.

The move comes as US and European Union sanctions against Iran have made it difficult for buyers to make dollar payments to Iranian banks.

Mahmoud Bahmani, the governor of Iran’s central bank, is reported to have said that the country would accept payment in gold “without any reservation”.
…
Iran has the world’s third-largest oil reserves. Crude oil is predominantly traded in US dollars, but Iran already accepts payment in other currencies.

Likely related to this announcement comes word in this WSJ story($) about the U.S. Treasury Department interceding to stop a Dubai based bank from supporting Iranian oil sales by helping the nation evade international sanctions that were put in place to pressure Iran to give up its nuclear weapons program.

According to the report, Noor Islamic Bank, partly owned by the city of Dubai and run by Sheikh Ahmed, the son of Duabai’s ruler, was believed to have handled as much as 60 percent of Iran’s oil sales last year totaling nearly $50 billion.

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Consumers Shrug Off Surging Gas Prices

On February 28, 2012, in Economy, by Tim

The Conference Board’s consumer confidence index reversed January’s decline with a February surge to near the recovery high as an improving labor market seems to have trumped surging gasoline prices … for the time being. The index jumped from 61.5 last month to 70.8, just down from the recovery high of 72.0 one year ago.

Those saying jobs were “hard to get” fell from 43.3 percent to 38.7 percent, the lowest since late-2008, as Americans were more confident about their earning potential, 15.4 percent expecting their income to rise versus only 12.7 percent who were pessimistic.

In looking at the relationship between consumer confidence and gasoline prices above, it would appear that there has not yet been enough time for recently surging pump prices to have an impact on consumer outlooks as has happened reliably in the past.

The fact that the winter gas price surge has been so sudden and that miles driven at this time of the year are far less than in the spring and summer would suggest Americans still don’t fully appreciate how much $4 and $5 gas prices are going to hurt.

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Gas Prices and Recessions

On February 24, 2012, in Commodities, Economy, by Tim

Anyone wondering about the relationship between rising gasoline prices and recessions might want to have a look at the chart below from the St. Louis Federal Reserve’’s FRED data base and observe that we seem to have “escaped a bullet” last year. But, if gas prices go as high this spring and summer as many are predicting, we may not be so lucky this year.

Energy Department data for retail gasoline prices only goes back to 1990, so, Labor Department data from the Consumer Price Index is used instead, presumably the only difference being that you get the CPI Gasoline index instead of gas prices on the left.

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Is that It for Consumer Confidence?

On February 23, 2012, in Commodities, Economy, by Tim

Along with the Reuters/University of Michigan consumer sentiment survey and the Conference Board’s consumer confidence index, Gallup’s latest survey of economic confidence has recently reached a peak as depicted below, one that is not likely to be reached again as long as gasoline prices continue to rise.

Like the other surveys, recent readings for the Gallup poll are more often associated with recessions than recoveries. We’ll probably find out this spring whether Americans’ dour mood has been justified or if the economic recovery really is as good as it looks.

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It’s Now All Gas Prices, All the Time

On February 23, 2012, in Commodities, by Tim

It seems rising pump prices and an election year are a potent combination as all sorts of people are now commenting on the price of gas, from President Obama all the way down.

What the nation’s politicians wouldn’t give to see signs like the one below this summer as the electorate mulls over who’s deserving of public office and who’s not…

Why? That’s pretty simple.

As goes the price of gasoline, so goes the economy.

As goes the economy, so goes the fate of many incumbents.

And, right now, the trajectory of the price at the pump does not bode well for the latter.

The automobile club AAA said the national average price for a gallon of gasoline jumped 3.3 cents just last night to $3.61 and, this morning, the Energy Department will  release their weekly update on gas prices that will indicate a similar move higher from last week’s $3.52 average.

Sometimes it makes you long for those days in late-2008 when gas prices tumbled to $1.62 a gallon. Of course, back then, the downside to low gas prices was that many thought the world was coming to an end…

With the cost of petrol at a record high for this time of the year, more predictions of $4 a gallon gas are being heard and, with prices already over that mark in parts of the country, $5 signs and $100 fill-ups could be the norm in places like California and New York.

That, and more stories like these, will make voters rather grumpy going into November.

Gas price surge: Up 10% this year – CNN/Money
Obama goes on offense over high gasoline prices – Reuters
Price of gasoline could determine Obama’s fate – MarketWatch
Dem leader Pelosi blames Wall Street for spike in gas prices – The Hill
Gasoline Prices Are Not Rising, the Dollar Is Falling – Forbes
Fear of Iran is inflating gas prices – CNN/Money
Goldman Goes Long WTI – Zero Hedge

All the intrigue is there – everything from the impact on a fledgling economic recovery to a blame game that runs the gamut from Wall Street to environmentalists.

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