Mish has previously spelled out his problems with some of the retail metrics. Specifically, the “same store sales” metric has a survivor bias. When a chain such as Circuit City goes bankrupt, Best Buy same store sales can improve even if overall retail activity has declined.
Last year, California raised their sales tax rate from 7.25% to 8.25%. That is a 13.8% increase. If sales activity was the same, you would expect sales tax receipts to increase by 13.8%. Instead, California Retail Sales and Use Taxes increased by 12.54%. So we infer that overall retail sales have actually declined. Maybe the celebration of the same store sales numbers as an indicator of consumer strength was premature.
There is more detail in Mish’s post, but I felt it was important to share the gist of it.
