Photo: Bloomberg Television
U.S. economic data has been coming in strong. Employment is improving, manufacturing is increasing, and housing continues its rebound.The economic highlight of this week was Wednesday’s February retail sales report, that broadly crushed expectations.
But bearish economist David Rosenberg didn’t see it quite that way.
While he acknowledges that the payroll tax hike and jump in gas prices haven’t been able to hold down the consumer, he does note one worrisome nugget in the report.
From today’s “Breakfast With Dave” note:
While receipts at the grocery chains were up sharply, restaurants posted a 0.7 per cent decline and this followed on the heels of a 0.6 per cent drop in January (in a sign that there is still frugality beneath the veneer, the data showed that ‘eating in is in while eating out is out’). Note that this the sharpest two-month decline since January-February of 2008, just as the recession was getting rolling. Only once in the 2002-2007 economic expansion did we see such a back-to-back decline, and only three times in the 1993-2000 up-cycle, and not once (!) in the super-long 1982-1990 growth era — so these are very rare outside of recessions. In fact, we also had a similar two-month decline in November-December of 2000 and the very next quarter, guess what? The prior recession to the one we recently began! As our PM Reno has pointed out time and again, this segment is leading indicator for consumer discretionary spending. The chart below shows the sequential restaurant sales in bars and the thin line illustrates the declining YoY trend.
Photo: Gluskin Sheff
Rosenberg isn’t saying that this screams recession. However, he believes that the retail sales report’s “sector composition was really strange.”
In other words, he’s not ready to get giddy about the U.S. recovery.
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