Commerce Department's Positive Spin on Retail Figures
by Travis Pantin
Wed, 26 Dec 2007 at 12:13 PM
The Commerce Department has been putting an overly positive spin on holiday sales data lately, the chief market strategist for Ritholtz Research, Barry Ritholtz, writes on the Big Picture blog.
Personal consumption expenditures last month increased $110.6 billion, or 1.1%, the Commerce Department said. That amounts to about three times October's gain, making it the highest sales increase in more than three years. "Given all that has been going on in the world of credit crunch, housing, food and energy prices, that seemed unlikely to me," Mr. Ritholtz writes.
"If you rely upon the Commerce Department, then sales are going just swimmingly. However, looking at the actual sales data, you may reach a very different conclusion," he writes.
After doing his own analysis of the consumer spending data, Mr. Ritholtz puts the resulting "econo-statistical gobbledy-gook into plain old English." He writes: "food and energy price increases accounted for a full two thirds (67%) of the November spending gains. So much for ya merry retail Christmas. ... Instead, it appears that price increases are accounting for the biggest percentage gains in sales."
In reply to his "trader buddies," who like to call such calculations "the 'Blah blah blah,'" Mr. Ritholtz points to the Standard and Poor's 500 Index. For the traders, "everything but the chart is noise," he writes.
And the charts back him up, too: After checking the retail portion of the S&P's total market index, Mr. Ritholtz writes, "That's not exactly the sort of chart one would expect to see — under performing by 20% — if retail sales were all that buff."
In closing, the strategist writes that he is "not telling anyone they need to believe as I do. But when I read mindless cheerleading, the flawed interpretation of data, the spin, wingnuttery and general hackdom (insert your own links here), I am compelled to call the cretins and neer-do-wells on their shenanigans." In order to cut through the fluff, "I let the data do the talking," Mr. Ritholtz writes.
Effective Climate Change Treaty 'Not Possible'
A law professor at the University of Chicago and blogger, Eric Posner, writes that he doubts "that states will be able to agree to a climate treaty that mandates significant limitations on greenhouse gas emissions."
In light of the recently concluded U.N. climate change conference in Bali, Mr. Posner says it is "worth addressing a taboo subject": Although nations may eventually enter into some sort of climate treaty, "an effective climate treaty is simply not possible."
Mr. Posner gives several reasons for doubting that states will be able to agree to a climate treaty that mandates effective limitations on greenhouse gas emissions.
One such reason is that "the various states that must cut their emissions have highly diverse interests," he writes.
States such as Russia, Mr. Posner says, "might not be harmed, might even be benefited, by global warming. Other states, such as India, will be greatly harmed. ... Some states need rapid economic growth in order to maintain political stability; others do not. ... All of this suggests that a uniform set of commitments cannot be mandated; at a minimum, politically sensitive side payments will be necessary. Will it be politically possible to give massive subsidies to China, an authoritarian state with a bad human rights record and increasingly perceived as a global rival? What about Russia?"
Moreover, Mr. Posner says the benefits of an effective climate treaty are not "of the type that normally motivates voters; whereas the costs are." The costs will immediately hurt the millions of people who must pay more for transportation and heat, while the benefits are "floods, disease outbreaks, and military conflicts — that do not occur. All this means that there will always be a large and suspicious group of voters who cannot understand the science and do not see the benefits that higher gas prices are paying for."
Mr. Posner writes that his reasoning might seem a bit theoretical. "But the evidence tends in the same direction," he writes. "It is impossible to think of an effective treaty regime that has surmounted all of the problems described above — or even more than one or two."
America Could Handle $15 Gas
A professor of economics at the University of Michigan, Mark Perry, points out on Carpe Diem that even if gas rose to $15 a gallon, America's "income would still be above the current living standards in Canada, Sweden, or England."
He writes: "My 'back of the envelope' analysis shows that per-capita U.S. GDP would drop by about 13% if gas was selling for $15 per gallon, assuming that annual per-capita consumption remains at the current level of about 464 gallons. At $3 per gallon, per capita spending on gasoline is about $1,400, and annual spending would rise to almost $7,000 at $15 a gallon. If we assume that the increased per-capita spending on gasoline of $5,560 annually would reduce our living standard by that amount, we can estimate that per capita-GDP would fall from $43,223 to $37,655, and we would still be above U.K., Sweden and Canada."
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