NEW$ & VIEW$ (26 NOVEMBER 2012)

I am travelling today, hence this abridged note.

Early Holiday Sales Pay Off, for Now

Strong weekend traffic and an online boom kicked off the holiday shopping season, but worries remain about whether retailers’ new tactics are simply shifting spending to different days and sales outlets.

Total spending for the weekend reached an estimated $59.1 billion, a 13% increase from a year ago, according to the National Retail Federation. Last year the group said sales rose 16% over the weekend.

A consumer survey conducted for the trade association by BIGinsight found that shoppers spent an average of $423 over the weekend, up 6% from $398 last Thanksgiving weekend.

A strong kickoff of holiday shopping isn’t necessarily a sign that overall sales during the season will rise. (…)

Wal-Mart said that shoppers who came for “door-buster” deals on electronics and toys stayed to snap up housewares.

“I never thought I’d see so much passion for sheets or Rubbermaid storage containers,” said Duncan Mac Naughton, the company’s U.S. merchandising chief. The Bentonville, Ark., retailer said it had 22 million customers Thursday between 8 p.m. and midnight. (…)

So, some 7% of Americans were in a Wal-Mart store on Thanksgiving evening!

High five  Black Friday is a bunch of meaningless hype, in one chart

(…) In fact, sales over Thanksgiving weekend tell us virtually nothing about retail sales for the full holiday season—let alone anything meaningful about the economy as a whole. Paul Dales of Capital Economics analyzed the relationship between retail sales during the week of Thanksgiving against the overall change in retail sales for November through January. As the chart shows, the relationship is a very weak one, with dots all over the grid. But if there is any conclusion to draw at all, the relationship is actually negative! (That’s why the line is sloping downward). (…)



Sad smile  Deadline Looms for Long-Term Unemployed

More than 40% of the nearly five million Americans who receive unemployment insurance are set to lose those benefits if federal programs expire as scheduled at year-end.

About 2.1 million Americans receive payments through federally backed emergency unemployment programs, which Congress adopted starting in 2008 as a temporary supplement to state-level programs funded primarily with taxes on employers, which generally offer six months of benefits.


For more than a year, unemployment benefits have been contracting. At the peak of the jobs crisis, workers in many states were eligible for up to 99 weeks of unemployment benefits. Today, New York offers the longest-lasting benefits, at 83 weeks, and other states—including those with double-digit unemployment rates such as Nevada and California—offer 73 weeks at most. In a handful of states, benefits now expire after less than a year.

As a result, benefits are expiring far faster than unemployed workers are finding jobs. As of October, about half of job seekers were receiving unemployment benefits, down from about 70% in early 2010.

China Wage Gains Hurt by Weaker Profit Damp Consumption

Average urban salaries rose 12 percent in the first nine months from a year earlier without adjusting for inflation, slowing from 14.4 percent for all of 2011 and 13.3 percent in 2010, government data show. (…)

Minimum wages rose an average 19.4 percent in 18 provinces this year through September, government data show. That follows nine-month gains of 21.7 percent in 21 provinces last year and 24 percent in 30 provinces in 2010. China has targeted an annual average increase of 13 percent for 2011-15.


Ghost  FT Alphaville reminds us that Chinese stats may not be totally reflective of the reality:

(…) Mark Williams of Capital Economics pointed out that only those properties that are “approved for sale” are included in inventory statistics — which probably excludes a lot of finished properties.

To illustrate this, Williams noted that there appeared to be a rather large spike that had appeared in housing starts but was yet to appear in housing completions:

China property starts & completions -- Capital Economics

Anne Stevenson-Yang, the principal of J Capital Research, has another good illustration of this in Tianjin:

The inventory numbers are sourced from China Real Estate Index System (CREIS), which is part of real estate data company Soufun. Again, it only counts properties with “pre-sales permits” in its inventory tally. By this count, the inventory overhang fall from 40 months’ worth in early 2012 to just 17 months’ worth by May.

There would have to be a lot of sales, right?

But there isn’t — at least not in the kind of pattern that matches that of the inventory:

Tianjin sales - JCapital

(…) Stevenson-Yang writes:

The reason why the proportion of sales to inventory really means very little is that developers offer for sale only that portion of the inventory that they believe they can collect money for immediately; otherwise, they would lock themselves into a delivery schedule for buildings they probably cannot afford to complete. […]

It is absolutely routine at property developments to have 20 or 30 high-rise towers, of which only two or three or four are being sold, even if the towers were mostly completed years earlier. This is a key reason why no one can tell you how much inventory is actually available: the numbers given are for the proportion that has received pre-sales permits.

Inventory is really a measure of available financing, says Stevenson-Yang.

She describes two other types of shadow inventory, which further underline how deeply connected inventory is to financing:

– Some developers haven’t met the standards for pre-sales permits, and have to sell through agencies. This inventory is not counted as salable.

– As many as a quarter of units are used as collateral for loan. “These units can be bought: the buyer simply directs a portion of the payment to the bank instead of to the developer. But collateralized units are not counted in available inventory—they are counted as sold.”

The most dramatic claim she makes is this:

Pointing up  The ghost city issue in China, far from being about a few extreme cases like that of Ordos, is absolutely ubiquitous. (…)


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