Mish's Global Economic Trend Analysis

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• Slovenia, Back in Recession, Scrambles to Avoid Economic Crash
• Retail Sales Up Scant .1% in December, Core Retail Sales Decline; Chart of Retail Sales Adjusted for Population Growth and Inflation
• Year-Over-Year Gasoline and Petroleum Usage Charts; Shares Decline as Chevron Warns of Weaker 4th Quarter Earnings

Slovenia, Back in Recession, Scrambles to Avoid Economic Crash Posted: 12 Jan 2012 08:58 PM PST Slovenia, like Hungary is on the brink of fiscal disaster. Unlike Hungary, Slovenia is in the Eurozone. The Guardian reports Slovenia scrambles to avoid economic crash as Zoran Jankovic, leader of largest party, fails to form a government to deal with debt issues. Slovenia was on Thursday scrambling to convince international lenders that it can avoid following Hungary's footsteps, after the leader of the country's largest party failed to form a government. MPs rejected the centre-left Zoran Jankovic as new prime minister, despite calls for a new government to deal with the country's increasing debt and threats of a further cut to its sovereign debt rating. Slovenia, which was the first post-communist country to join the euro in 2007, was downgraded A1 from Aa3 in December by ratings agency Moody's. Officials fear that political uncertainty and reliance on exports to the EU will trigger a further downgrade and a steep rise in borrowing costs. The country is already being forced to borrow at rates above 7%. Jankovic, whose Positive Slovenia party gained the most votes at a snap election in December, needed the support of at least 46 out of 90 parliamentary members but only managed to gain the support of 42. The president and members of parliament now have up to 14 days to nominate new candidates with Janez Jansa, head of the centre-right Slovenian Democratic Party, the second strongest party in parliament, the most likely to win. In 2007, not long after it joined the euro, the European Central Bank warned Slovenia that a prolonged spending binge risked an economic crash. The country, which has a population of 2 million, was badly hit by the global crisis and its economy shrank by 8% in 2009. After a mild recovery in 2010, recent data showed that another recession was possible, as the economy contracted by 0.5% in the third quarter of 2011. Jansa, who was prime minister from 2004 to 2008, has pledged to cut the budget deficit, speed up privatisation and selectively raise the retirement age. Slovenia's political crisis started in September, when parliament ousted the centre-left government of prime minister Borut Pahor over internal coalition squabbles and its inability to enforce reforms that would speed up economic growth. All of the main credit agencies have cut Slovenia's ratings since September and put it on a negative watch. Fitch said last week that Slovenia needed to form a new government urgently and come up with a plan to narrow its budget deficit to maximise its chance of averting another rate cut. There is absolutely no way to prevent a massive European recession nor is there any way to prevent various economies like Greece, Portugal, Spain, Slovenia, and Hungary from outright economic crashes. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Retail Sales Up Scant .1% in December, Core Retail Sales Decline; Chart of Retail Sales Adjusted for Population Growth and Inflation Posted: 12 Jan 2012 09:22 AM PST Following all the glowing retail sales reports for Christmas, the actual numbers reported today show a mere .1% rise. Excluding autos which rose 1.5%, retail sales actually declined. MarketWatch reports U.S. retail sales rise scant 0.1% in December Sales at U.S. retailers increased 0.1% in December, the government said Thursday, in a report that bucked expectations of stronger sales during the holiday period. "Apparently, all those reports of a robust holiday shopping season were made by people too much into the holiday spirits as retail sales did not surge in December," said Joel Naroff, president of Naroff Economic Advisors, Inc. Electronics were touted as one of the strongest sectors for holiday shopping. But the Commerce Department's data showed a 3.9% monthly decline at electronic stores. Sales at online retailers, another supposed holiday hotspot, fell 0.4%. Sales at the nation's malls were lower in December. Sales at general merchandise stores fell 0.8%, including a 0.2% decrease at department stores. Excluding a 1.5% rise in motor vehicles sales, retail sales for the month fell 0.2% — much weaker than the 0.3% gain expected. Sales at gasoline stores fell 1.6% in December. Excluding autos and gasoline, sales were flat on the month. So-called "core" sales, which exclude autos, gasoline, and building materials, fell 0.2% in December. This was the one and only drop in core sales seen during 2011. Some Retail Sales Components Retail Sales +.1% Core Retail Sales -.2% Gasoline Store Sales -1.6% Electronics -3.9% General Merchandise -.8% Autos +1.5% Furniture +1.0% Building Materials and Hardware +1.6% Leisure, Sports, Hobbies, Reading -.4% Health and Personal Care +.6% Food and Beverage -.2% Restaurants and Bars +.7% Non-store outlets and online stores -.4% Retail Sales Adjusted for Population Growth and Inflation Doug Short has some interesting charts in his report Retail Sales: A Disappointing 0.1% in December The Retail Sales Report released this morning shows that retail sales in December were up 0.1% month-over-month (but the Census Bureau notes that the statistical confidence range is ±0.5%). That was well below the Briefing.com consensus forecast of 0.4% and Briefing.com's own expectation of 0.5%. The charts below give us a rather different view of the U.S. retail economy and the long-term behavior of the consumer. The sales numbers are adjusted for population growth and inflation. For the population data I've used the Bureau of Economic Analysis mid-month series available from the St. Louis FRED with a linear extrapolation for the latest month. Inflation is based on the latest Consumer Price Index. December retail sales adjusted accordingly rose 0.1% month-over-month but only 2.4% year-over-year, far less than the 6.5% nominal YoY increase. Consider: During the past 20 years, the U.S. population has grown by 23% while the dollar has lost about 39% of its purchasing power to inflation. When we adjust accordingly, the rebound in retail sales from the bottom in April 2009 merely gets us back to the per capita spending of December 1999, over twelve years ago. Retail sales have been recovering since the trough in 2009. But the "real" consumer economy, adjusted for population growth is still in recession territory — 7.0% below its all-time high in January 2006. Considering the massive 50% off entire store sales that it took to clear merchandise in December, this may have been the last gasp of this economic "recovery". Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Year-Over-Year Gasoline and Petroleum Usage Charts; Shares Decline as Chevron Warns of Weaker 4th Quarter Earnings Posted: 12 Jan 2012 08:32 AM PST Here is the latest chart from Tim Wallace on gasoline and petroleum usage. click on chart for sharper image Wallace writes... Hello Mish Chevron is reporting weaker than expected results. As we discussed earlier I was expecting this one due to the obvious disconnect on gasoline prices and petroleum futures. Gasbuddy has a great site for seeing this one coming when you lay the gas prices on the petroleum graphs. Tim Chevron Warns of Weaker 4th Quarter Earnings MarketWatch reports Chevron warns of weaker fourth-quarter results Chevron Corp. CVX -2.52% said late Wednesday it expects fourth-quarter earnings to come in "significantly below" its third-quarter results. In its interim quarterly report, Chevron said earnings from its "upstream" exploration and production business will be comparable to its third-quarter results while earnings from its "downstream" refining and marketing operations are likely to fall from the previous quarter's results to break-even. The San Ramon, Calif.-based oil company blamed weak refining margins and refining volumes for the downbeat earnings outlook. The company is scheduled to release its fourth-quarter results on Jan. 27. Chevron shares fell as much as 2% to $105.61 in after hours trade. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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