Rajoy Further Implicated in Scandal; Support Drops to 23.9% in Record Plunge

Prime minister Mariano Rajoy is now personally implicated in the slush fund scandal in Spain. Via Google translate, please consider Rajoy and his family were paid with money from Gürtel travel

The front page of Monday's newspaper "La Gaceta" promises new revelations about political scandals that are playing close to the popular government of Mariano Rajoy.

The fore mentioned entitled 'A Rajoy also paid travel, "about a picture of the back of the highest representative of the Spanish.

"His wife, his son and personal assistant flew business class to Las Palmas with money Gürtel", added the subtitle, attaching notes as evidence under seal 'exclusive'.

That should not be a surprise, but what choices do voters have?

Please consider this choppy translation from El Pais: crisis and corruption lead to PP to lower expectations

At this time, there is a ruling party with almost hegemonic majority, allowing it to act with little parliamentary scrutiny and yet have an estimate of the single vote of 23.9%, the lowest of democracy, only one year after having swept the polls. In a month and has lost six points from more than 20 points overall, without stating whether touched and thoroughly. And in theory are almost three years to allow citizens to speak at the polls. Your vote expectancy is now almost three points below the result of the AP of Manuel Fraga , 1982, when the PSOE of Felipe González swept him with 202 deputies.

Political Party Descriptions

From Wikipedia, here is a description of the top political parties in Spain.



Who do voters trust?

No one. Worse yet, Rajoy and the EU have threatened journalists that do not toe the party line. It's 1984 in spades. For details, please see Big Brother in Action: EU Wants Power to Sack Journalists; Prime Minister Rajoy Threatens Newspapers Following Corruption Articles 

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Extreme Sentiment: Barron's Cover "Get Ready for Record Dow - We Told You So"; Top Call

Looking for extreme sentiment?
Look no further than the cover of Barron's magazine.



The cover speaks for itself, but check out some of the commentary in New Highs in Sight

The party is far from over. The early-year rally that on Friday took the Dow Jones Industrial Average to within 1% of its record high, set in 2007, could have a lot further to run. For starters, stocks aren't expensive. The Standard & Poor's 500 index is valued at about 14 times estimated 2013 profits and the Dow fetches less than 13 times projected 2013 earnings. At the market peak in 2007, the Dow traded for 16 times forward earnings. Given ultralow interest rates, the market multiple has room to expand even if earnings growth remains modest.

There's a huge amount of money that could shift into stocks because individuals until recently have favored bonds over equities, based on mutual-fund flow data. "If there is a great rotation going on from bonds to stocks, we may be only in the top of the first inning," says Jason Trennert, chief investment strategist at Strategas Research Partners in New York. Trennert cites the TINA -- or "there is no alternative" -- factor, as yield-starved investors move into stocks.  

First Inning?

For starters, are the forward earnings estimates any better now than they were in 2007?

Second,  let me point out that money does not flow from stocks to bonds or vice versa. For every buyer of stocks there is a seller, so the statement on rotation from bonds to stocks is point blank absurd. There can be a repricing of bonds, a repricing of stocks, a repricing of both, or a repricing of neither, but there is no flow.

Third let me ask "Does it get any more extreme than someone calling this the first inning after stocks have had more than a 100% rally in a few years?

Nonetheless, sentiment alone cannot time a top. Perhaps the DOW or the S&P do make new record highs. Regardless, this Barron's cover reminds me of a post I did back in 2005.

Home $weet Home

Back on June 7th, 2005 I put in a top call with help from Time Magazine. That top call was based on this cover.



Time Magazine went gaga over real estate on the June 12th issue, right at the very peak of the bubble. Congratulations must go out to Time Magazine for that fine achievement.


On March 26, 2005, in It's a Totally New Paradigm I posted this chart



Then when the cover of Time hit, I moved the arrow to the top. Check out the comments at the time.

Ron Shuffield, president of Esslinger-Wooten-Maxwell Realtors says that "South Florida is working off of a totally new economic model than any of us have ever experienced in the past." He predicts that a limited supply of land coupled with demand from baby boomers and foreigners will prolong the boom indefinitely.

"I just don't think we have what it takes to prick the bubble," said Diane C. Swonk, chief economist at Mesirow Financial in Chicago, who was an optimist during the 90's. "I don't think prices are going to fall, and I don't think they're even going to be flat."

"I look at this as a short-term investment," said Mr. Farquharson, 36, who works for a venture capital firm, "and plan to unload it as soon as things look dangerous."

Top Call  

Supposedly we are only in "the first inning" of a rally. Hmm. Are stocks supposed to rise 900% more? This may not be "the top" but it's close enough for me. I'm calling it.

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/

Obamacare in Action: Retail Workweek Hits 3-Year Low

Hooray! The economy is adding jobs (supposedly). However, few look at the quality of the jobs, and whether or not they are part-time.

Jed Graham has a nice post on Investor's Business Daily that describes what I have been saying for months: Obamacare has accelerated the trend towards part-time jobs. There are more jobs, but fewer hours in them.

Please consider Retail Workweek Hits 3-Year Low In ObamaCare Shift by Jed Graham.

The fly in the ointment of January's jobs report was the apparent shift to part-time work ahead of a key ObamaCare deadline.

Although retail payrolls grew by 32,600, total hours worked in the industry dipped, Labor Department data out Friday showed.

The explanation? Rank-and-file retail workers logged the shortest workweek since early 2010: just 30.1 hours, on average, vs. 30.4 in December.

Remarkably, aggregate hours worked in the retail sector fell below their January 2012 level, even though industry payrolls are up 200,000 over that period. A similar trend showed up in leisure and hospitality: January payrolls rose by 23,000 even as aggregate hours dipped 0.3%.

Not Unexpected

This Obamacare-sponsored shift toward part-time jobs is certainly not unexpected, at least in this corner.

• October 9: Is Obamacare Responsible for the Surge in Part-Time Jobs? What About Obama's Defense Layoff Suspensions?
 
• October 10: Prepping for Obamacare, Olive Garden and Red Lobster Cut Workers' Hours; Are Other Companies Doing the same? Tip Sharing Lowers Minimum Wage; Like One, Like All?
 
• October 20: Mish Obamacare Mailbag: Expect More Part-Time Jobs

Last Hurrah?

I challenge the notion the economy added 157,000 jobs last month. I also challenge 23,000 leisure and hospitality jobs, and I challenge the claim that retail payrolls grew by 32,600.

For three straight months the household survey is way out of line with the payroll survey. This past month the household survey showed a net gain of only 17,000 jobs (please see Last Hurrah for Jobs? for details)

Yes, many prior months were revised up. But where are we now, going forward?

If the economy really did add 157,000 jobs on the "strength" of part-time hiring, then this was the last hurrah. If not, then I expect those BLS revisions to be re-revised away and October or November was the last hurrah.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Yum! The McRib is Back, Get Yours Today (After You Find Out What's In It); The Secret's in the Sauce!

McDonald's does an excellent job at promoting sandwiches on its menu.

Top on the list is the "McRib" which comes and goes in "limited time" offers. You can even use a McRib Locator to find out which chains have the delicacy.

Before you rush out of your house to get one, you may be wondering "What's in a McRib".

That's a good question and the Natural Society has the answer in McDonald’s McRib Sandwich a Franken Creation of GMOs, Toxic Ingredients, Banned Ingredients.

The McRib is the result of intensive marketing by McDonald’s. Utilizing the basics of supply and demand through creating scarcity over the McRib by only unleashing the culinary abomination for a fraction of the year that is only known once it is released, McDonald’s fans have been known to ‘hoard’ McRib sandwiches and eat them in extreme excess.

But what’s really inside the McRib specifically that makes it such a food abomination? Containing over 70 ingredients, the McRib is full of surprises — including ‘restructured meat’ technology that includes traditionally-discarded animal parts brought together to create a rib-like substance. Here’s some of the disturbing substances found within the McDonald’s McRib sandwich:

A flour-bleaching agent used in yoga mats

Out of the 70 ingredients that make up the ‘pork’ sandwich, a little-known flour-bleaching agent known as azodicarbonamide lies among them. At first glance, this strange ingredient sounds concerning enough to look into. After a little research, you will find that even mainstream media outlets have generated content revealing how azodicarbonamide is actually used in the production of foamed plastics. Foamed plastics like yoga mats and more.

What’s more? In Australia and Europe, the use of azodicarbonamide as a food additive is banned. In Singapore specifically, use of this substance in food can result in a $450,000 fine and 15 years in jail. Thank you McDonald’s for supplying the nation with such healthful ingredients.

‘Restructured Meat’ from Pig Heart, Tongue, Stomach

McDonald’s McRib is famous in some circles for utilizing what’s known as ‘restructured meat’ technology. Since McDonald’s knows you’d never eat a pig heart, tongue, or stomach on your plate, they decided instead to grind up these ingredients and put them into the form of a typical rib. That way, consumers won’t know what they’re putting into their mouths. As the Chicago Mag reported, the innovator of this technology back in 1995 said it best:

“Most people would be extremely unhappy if they were served heart or tongue on a plate… but flaked into a restructured product it loses its identity. Such products as tripe, heart, and scalded stomachs…”

So in other words, it’s not actually a rib. Instead, it’s a combination of unwanted animal scraps processed down in major facilities and ‘restructured’ into the form of a rib. Then, 70 additives, chemicals, fillers, and GMO ingredients later, you have a ‘meat’ product that tastes like ribs.

Whopper Horsemeat

Surely Burger King is not tainted with such tactics. Or is it? For the answer, let's take a look at another report from the Natural Society: Burger King Admits Burgers Contain Horsemeat

In a piece of highly disturbing news, Burger King has now admitted after continuous denial that it has actually been selling UK customers both burgers and Whoppers that contain horsemeat. This admission comes just after The Guardian reports that Burger King reps offered a round of ‘absolute assurances’ to customers that it did not ever use horsemeat in its products.

A series of tests done on the burger products now reveal that Burger King has been issuing completely phony statements, with burgers made for the fast food chain from the Irish company Silvercrest containing measurable levels of horsemeat. It’s important to note this is the same company that processes meat for Tesco, Asda, and the Co-op. The managers at Silvercrest have been revealed to be utilizing non-approved ingredients within their burger assortment – even for ‘household brands’.

Burger King Admits Error

The Guardian reports Burger King reveals its burgers were contaminated in horsemeat scandal.

Burger King has revealed that some of its burgers were contaminated in the horsemeat scare, as the tainted food crisis threatened to undermine the confidence of consumers, and major retailers tried to protect their reputations.

As governments in Ireland, the UK and Poland, where a supplier used by Silvercrest for a year is thought be the source of the contamination, continued their investigations, Burger King admitted that, contrary to previous assurances made to it by Silvercrest, it too had now been linked to the scandal. Authorities insist there is no health danger to consumers.

Meanwhile Aldi UK became the first major retailer to suspend its contract with a British plant, Dalepak Hambleton in North Yorkshire, which, like Silvercrest, is part of the ABP Food Group, pending further investigations into why three of nine newly tested burger samples had traces of horse and pork DNA. The products were from stock withdrawn in recent weeks as a precaution but made since October, the company said.

Burger King said: "Our independent DNA test results on product taken from restaurants were negative for any equine DNA. However, four samples recently taken from the Silvercrest plant have shown the presence of very small trace levels of equine DNA. Within the last 36 hours, we have established that Silvercrest used a small percentage of beef imported from a non-approved supplier in Poland. They promised to deliver 100% British and Irish beef patties and have not done so. This is a clear violation of our specifications, and we have terminated our relationship with them."

Diego Beamonte, vice-president for global quality at Burger King, said the company was "deeply troubled by the findings of our investigation and apologise to our guests, who trust us to source only the highest quality 100% beef burgers. Our supplier has failed us and in turn we have failed you".

Surprise? What Surprise?

Is anyone surprised by this? I certainly am not.

Indeed, after reporting on the "Extra-Value" Horse-Burger at grocery chains in the UK and Ireland, I would have been surprised to find out that burger chains were not contaminated as well.

Heck, even before reading articles on contamination I would have been surprised.

The Secret's in the Sauce!

Inquiring minds might wonder "Just how does McDonald's get the McRib to taste so yummy?" That's a good question too, and I have two answers.

Some simply like azodicarbonamide, bleaching agents, tripe, heart, scalded stomachs, tongues, and other unwanted animal scraps restructured into the form of a rib.

For everyone else, "The secret's in the sauce!" (Just don't ask what's in it).

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

500,000 People Sign Petition Asking Prime Minister Rajoy to Resign

The indignation of citizens over payouts and graft in Spain is highlighted by a flood of protests on Spanish social networks. A campaign on Change.org, a platform with 25 million registered has collected a record 500,000 signatures calling for the resignation of Prime Minister Marinao Rajoy.

Via Google translate from El Pais, please consider 500,000 People Sign Petition Asking Prime Minister Rajoy to Resign.

The indignation of the public by publication in the country of the secret papers of the PP extesoreros, reflecting payments to the party leadership, is flooding social networks with messages calling responsibilities to Prime Minister Mariano Rajoy. appear together under tags like # Rajoydimisión or # quesevayantodos , in addition to the proposal for this diary # lospapelesdebárcena s. This wave of criticism also translates into hundreds of thousands of citizens (over 500,000 in just over a day) have signed a petition asking for "the resignation of the leadership of the PP", including Rajoy, and "all who have received payments in black money ".

"I wish we lived in a democracy and could revoke the government for not fulfilling its election and alleged corruption cases like this," explains Pablo Gallego , petition drives the platform Change.org . This 24 year old from Cadiz that their initiative is collecting 40,000 signatures per hour, a pace that, if continued throughout the day, could mean reaching one million accessions this Saturday.

If that number is reached, Gallego with messages intended to go to the national headquarters of the PP in Madrid.

Tipping Point

As I have said repeatedly, one never knows when the tipping point is. However, given the combination of massive government corruption coupled with unemployment of 26.6% and youth unemployment of 56%, it is certain the tipping point will indeed be reached.

For more on the scandal and what the prime minister is doing to suppress reporting of the corruption, please see Big Brother in Action: EU Wants Power to Sack Journalists; Prime Minister Rajoy Threatens Newspapers Following Corruption Articles.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Last Hurrah for Jobs? Establishment Survey +157,000 Jobs; Household Survey +17,000 Jobs; Unemployment Rate +.1 to 7.9%; Unemployment +126,000

Initial Reaction

The establishment survey reported a gain of  157,000 job this month.

However, for the third consecutive month, the household survey is much weaker than the headline number.

The household survey shows a gain of a mere 17,000 jobs. Last month the household survey gained only 28,000 jobs. The unemployment rate rose to 7.9%.

As measured by the household survey (the basis for the reported unemployment number) the number of unemployed rose by 126,000.

Note: The BLS did not produce its usual collection of graphs today that I normally include in this report.  I was scrambling to find them but the report has changed, perhaps just for this month.

Massive population adjustments may explain the lack of charts this month.

Census Adjustments

Last month I stated "In the last year, the civilian noninstitutional population rose by 3,766,000"
This month I report "In the last year, the civilian noninstitutional population rose by 2,394,000. That is a huge downward census adjustment.

December BLS Jobs Report at a Glance

• Payrolls +157,000 - Establishment Survey
• US Employment +17,000 - Household Survey
• US Unemployment +126,000 - Household Survey
• Involuntary Part-Time Work +55,000 - Household Survey
• Baseline Unemployment Rate +.01 at 7.9% - Household Survey
• U-6 unemployment +.00 to 14.4% - Household Survey
• The Civilian Labor Force +143,000 - Household Survey
• Not in Labor Force  +169,000 - Household Survey
• Participation Rate +.00 to 63.6 - Household Survey

Recall that the unemployment rate varies in accordance with the Household Survey not the reported headline jobs number, and not in accordance with the weekly claims data.

Quick Notes About the Unemployment Rate

• In the last year, those "not" in the labor force rose by 1,095,000
• Over the course of the last year, the number of people employed rose by 1,714,000
• In the last year the number of unemployed fell from 12,748,000 to 12,322,000 (a drop of 426,000)
• Long-Term unemployment (27 weeks and over) was 4,708,000 a decline of 58,000
• Percentage of long-term unemployment is 38.1%. Once someone loses a job it is still very difficult to find another.

January 2013 Jobs Report

Please consider the Bureau of Labor Statistics (BLS) January 2013 Employment Report.

Total nonfarm payroll employment increased by 157,000 in January, and the unemployment rate was essentially unchanged at 7.9 percent, the U.S. Bureau of Labor Statistics reported today. Retail trade, construction, health care, and wholesale trade added jobs over the month.

Click on Any Chart in this Report to See a Sharper Image

Unemployment Rate - Seasonally Adjusted




Average weekly hours remained flat at 34.4 hours. A year ago average hours were 34.5 hours. Average hourly earnings rose this month from $23.74 to $23.78.

Real wages have been declining. Add in increases in state taxes and the average Joe has been hammered pretty badly. For 2013, one needs to factor in the increase in payroll taxes for Social Security.

For further discussion of income distribution, please see What's "Really" Behind Gross Inequalities In Income Distribution?

BLS Birth-Death Model Black Box

The BLS Birth/Death Model is an estimation by the BLS as to how many jobs the economy created that were not picked up in the payroll survey.

The Birth-Death numbers are not seasonally adjusted, while the reported headline number is. In the black box the BLS combines the two, coming up with a total.

The Birth Death number influences the overall totals, but the math is not as simple as it appears. Moreover, the effect is nowhere near as big as it might logically appear at first glance.

Do not add or subtract the Birth-Death numbers from the reported headline totals. It does not work that way.

Birth/Death assumptions are supposedly made according to estimates of where the BLS thinks we are in the economic cycle. Theory is one thing. Practice is clearly another as noted by numerous recent revisions.

Birth Death Model Adjustments For 2012



Birth Death Model Adjustments For 2013



Birth-Death Notes

Once again: Do NOT subtract the Birth-Death number from the reported headline number. That approach is statistically invalid.

In general, analysts attribute much more to birth-death numbers than they should. Except at economic turns, BLS Birth/Death errors are reasonably small.

For a discussion of how little birth-death numbers affect actual monthly reporting, please see BLS Birth/Death Model Yet Again.

Household Survey Data



click on chart for sharper image

There were massive revisions in labor force statistics this month.

Last month I stated "In the last year, the civilian noninstitutional population rose by 3,766,000.

This month I report "In the last year, the civilian noninstitutional population rose by 2,394,000. That is a huge downward census adjustment.

Last month I reported "Year-over-year, those not in the labor force rose by 2,394,000
This month I report "Year-over-year, those not in the labor force rose by 1,095,000 to 89,008,000."

In the last year, the labor force rose by 1,298,000.

Decline in Labor Force Factors

1. Discouraged workers stop looking for jobs
2. People retire because they cannot find jobs
3. People go back to school hoping it will improve their chances of getting a job
4. People stay in school longer because they cannot find a job

Were it not for people dropping out of the labor force, the unemployment rate would be well over 10%.

Part Time Status (in Thousands)



click on chart for sharper image

There are 7,918,000 workers who are working part-time but want full-time work. This is a volatile series.

Table 15 BLS Alternate Measures of Unemployment



click on chart for sharper image

Table A-15 is where one can find a better approximation of what the unemployment rate really is.

Notice I said "better" approximation not to be confused with "good" approximation.

The official unemployment rate is 7.9%. However, if you start counting all the people who want a job but gave up, all the people with part-time jobs that want a full-time job, all the people who dropped off the unemployment rolls because their unemployment benefits ran out, etc., you get a closer picture of what the real unemployment rate is. That number is in the last row labeled U-6.

U-6 is much higher at 14.4%. Both numbers would be way higher still, were it not for millions dropping out of the labor force over the past few years.

Duration of Unemployment



Long-term unemployment remains in a disaster zone with 38% of the unemployed in the 27 weeks or longer category.

Grossly Distorted Statistics

Given the complete distortions of reality with respect to not counting people who allegedly dropped out of the work force, it is easy to misrepresent the headline numbers.

Digging under the surface, much of the drop in the unemployment rate over the past two years is nothing but a statistical mirage. Things are much worse than the reported numbers indicate.

The Last Hurrah?

For the third month in a row, the underlying numbers were weak. The revisions to the population statistics support some of the drop in the unemployment rate, but those adjustments are in the past.

The recent divergence between the household survey and the payroll survey will close. The question is which way. Given business hiring plans, Obamacare adjustments, and the increase in payroll taxes that will take 2% of consumer spending away from those who need it most, I expect this is the last hurrah for jobs.

For a look ahead to 2013, please see Small Business Owners' Hiring Intent Plunges to 2008 Lows; Don't Blame Sandy or Fiscal Cliff.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

"Wine Country" Economic Conference Hosted By Mish
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French Retail Sales Drop 10th Month Accompanied by Sharper Drop in Employment; Italy Retail Sales Drop 23rd Month; Eurozone Sales Collapse 15th Month; Wholesale Prices Soar

Is the worst over for the Eurozone? That's what the ECB and heads of state said at the recent economic summit in Davos.

I offer some economic reality.

Eurozone Sales Collapse 15th Month and Wholesale Prices Soar

The Markit Eurozone Retail PMI® shows Eurozone retail sales downturn extends to fifteenth month in January

Key points:

• Rate of decline remains sharp despite easing since December
• Sales growth resumes in Germany
• Wholesale prices rise at fastest rate in ten months

Summary

Markit’s Eurozone retail PMI® data for the opening month of 2013 signalled a fifteenth consecutive month-on-month decline in sales values, even after accounting for the post-festive slump in trading and a resumption of growth among German retailers.

The three largest Eurozone economies are covered by the retail PMI surveys. The German Retail PMI hit a seven-month high and rose above 50.0, signalling a return to growth following December’s contraction. French retailers meanwhile saw another solid fall in sales at a rate broadly similar to that seen in the final month of 2012 (adjusted for seasonal influences). French retail sales have declined for a survey-record ten successive months. In Italy, retail sales fell for the twenty-third consecutive month, and the rate of decline remained severe despite easing since December.

The rate of wholesale price inflation accelerated further in January to reach a ten-month high, linked to suppliers passing on higher raw material costs. All areas of retail posted rapid increases in suppliers’ prices except for clothing & footwear. Despite this, the value of retailers’ new purchases fell sharply, as they aimed to minimise warehouse levels in the face of weak demand. Subsequently, the value of goods held in stock at retailers declined for the fifth month running, and at the fastest rate since August 2010. Pressure on retailers’ gross margins remained intense, however, most notably in Italy.

The combination of falling sales, rising cost pressures and a margin squeeze resulted in a
further round of job cuts at Eurozone retailers, even after accounting for the usual post-festive reductions. Employment in the sector has fallen every month since April 2012, and the rate of decline accelerated to the fastest since last July. German retailers again bucked the trend, registering sustained workforce growth.

Italy Retail Sales Drop 23rd Month

The Markit Italy Retail PMI® shows further sharp drop in retail sales, despite reaching four-month high

Key points:

• PMI rises for second straight month, but still signals steep contraction in sales
• Sharpest drop in purchasing activity among retailers since August
• Wholesale price inflation accelerates to 11-month high

Summary:

January saw a further deterioration in the health of Italy’s retail sector, with decreased sales leading to another round of job cuts. Purchasing activity among businesses fell accordingly, contributing to a further reduction in stock levels. There was more bad news on the costs front, with purchases prices rising at the fastest rate in 11 months.

Italian retail sales continued to fall at a sharp monthly rate at the start of the year, as indicated by the seasonally adjusted PMI® posting at 37.5 in January. This extended the current period of contraction to almost two years. That said, the index was the highest in four months, having risen slightly from December’s mark of 36.8.

Germany Returns to Growth

The Markit Germany Retail PMI® shows return to growth at start of year

Key points:

• Marginal expansion of retail sales during January
• Employment growth continues
• Wholesale price inflation highest since April 2012

At 51.0 in January, the seasonally adjusted Germany Retail PMI recovered from the eight-month low of 47.6 posted during December. However, the month-on-month rate of retail sales growth was only marginal, in part reflecting reports by survey respondents of subdued underlying consumer demand at the start of 2013.

...but like-for-like sales are lower than one year earlier

The marginal rise in month-on-month retail sales contrasted with a decline on an annual basis registered during January. Latest data pointed to a moderate reduction in like-for-like sales compared with one year earlier, and the pace of contraction was the sharpest since May 2010. Moreover, the index was in negative territory for the first time in nine months.
January sales disappoint compared to targets

Actual sales in the German retail sector fell short of initial targets during January, as has been the case in each month since April 2012. Moreover, the degree to which sales were lower than expected was the most marked for one year.

Margins squeezed at slowest pace since May 2011, despite sharper pace of cost inflation. Gross operating margins in the German retail sector decreased for the twenty-sixth successive month in January. Average prices paid by retailers for their purchases increased for the thirty-seventh month running, and at the sharpest rate since April 2012.

French Retail Sales Drop 10th Month Accompanied by Sharper Drop in Employment

The Markit France Retail PMI® shows Decline in French retail sales extends to tenth consecutive month.

Key points:

• Sales continue to decline at solid pace
• Sharper fall in employment
• Accelerated drop in purchasing

Summary:

Latest data pointed to another drop in French retail sales at the start of 2013. Falling for a tenth consecutive month, sales contracted at a solid pace during January. Purchase price inflation remained strong, maintaining pressure on gross margins. Retailers cut their purchasing activity at a sharper rate, leading to a faster decline in inventories of goods for resale. Employment meanwhile fell at the sharpest rate in five months.

The index measuring sales versus one year ago also pointed to a sharp decrease in the latest survey period. The annual rate of contraction was the most marked since October 2012.

French retailers signalled that the average price of their purchases continued to increase during January, which they mainly attributed to suppliers passing on higher raw material costs. The rate of purchase price inflation was similar to the strong pace recorded in December.

The value of goods ordered by French retailers for resale fell again in January, extending the current period of contraction to 16 months. The latest decrease was the sharpest since October 2012.

Comment:

Jack Kennedy, Senior Economist at Markit and author of the France Retail PMI, said:
“The new year failed to bring cheer to the French retail sector, with the downturn in sales extending to a tenth consecutive month in January. The deterioration in general economic conditions continues to weigh heavily on the retail sector, with consumers reining in spending and stores reporting decreased levels of footfall. There also seems to be no end in sight to the long-running theme of squeezed margins, reflecting a combination of strongly rising wholesale prices and the need to discount goods in an intensely competitive environment.”

Worst of Everything

• Sales are down year-over-year across the board 
• Sales are down month-over-month except for a small rise in Germany 
• Price inflation is up across the board 
• Margin squeeze across the board 
• Employment is down 
• France is sinking into the abyss 
• Italy already in abyss

But hey ... the worst is behind (or so they say).

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com