US same stores growth lowest in 37 years

To say US same store retail sales growth for the month of April was soft would be an understatement. In fact, there was no growth as measured by the IBS International Council of Shopping Centers sales tally which posted a decline of 2.3 percent, the biggest drop since the index started tracking the data in 1970. Furthermore negative same store sales growth during the same period have only occurred on two previous occasions - April's being by far the sharpest. Retail bellweather Wal-Mart (WMT) reported a same stores sales decline of 3.5% - its deepest decline in 28 years.

Then yesterday the Commerce department released it's retail sales figures for April. Consensus was predicting a 0.4% rise in retail sales, the number disappointed falling 0.2%. Remember the Commerce Department figures contain gasoline sales which spiked to their highest levels since the disruption caused by Hurricane Katrina, excluding gas the decline was 0.4%. Read the full report here.

You'll be happy to know that economists are in agreement that the worst is now behind us, if you are laughing incredulously at the preceeding line you are not alone. Also the market took heart in the evidence of a slowing economy because of the possibility of interest rate cuts. I've commented before on the twisted logic that says interest rate cuts are good. Whilst it's true that interest rate cuts make equities more attractive relative to bonds, When interest rate cuts are bought about by a slowing economy and two-thirds of that economy's growth is driven by the consumer what do you think is happening to corporate profit growth?

On retailers earnings, 1Q07 is looking fairly robust, remembering that the Easter sales period was included in March numbers. If April is any guide 2Q07 earnings for retailers are looking soft. If we haven't passed the worst of the economic downturn as economists would have us believe and get a continuance of soft retail and housing numbers during 2Q07 we could be getting very close to the use of the forbidden 'r' word. In case you are wondering that forbidden word is recession.