Macroblog

It appears that we can now assume (a) the gift-card distortion on the timing of year-end retail sales is to be taken seriously; and (b) the effect of weather can cut many ways.  From the Wall Street Journal Online (subscription required): 

Retailers reported solid sales gains for January, as shoppers armed with holiday gift cards snatched up bargains on winter clothing amid a late-breaking cold snap.

Luxury stores rang up big increases as their well-heeled clientele continued their stock-market-fueled sprees. Midprice department stores and specialty chains also shared in the postholiday bonanza, clearing holiday inventories that had languished through an unusually balmy December...

January same-store sales -- or sales at stores open at least a year, a closely watched measure of retail performance -- rose 3.9%, according to an index of 55 major chains compiled by Thomson Financial.

But the more interesting story may be this one, from MarketWatch:

Inventories at U.S. wholesalers dropped unexpectedly in December, which puts the economy in better position for strong growth in coming months, although the final quarter of 2006 will look weaker.

Inventories fell 0.5%, the Commerce Department said Thursday, marking the first decline since August 2003 and the largest drop seen since May 2003.

The decline in inventories was unexpected.

Today's U.S. wholesale trade report revealed that the BEA was indeed overly optimistic with their inventory assumptions underlying the advance report of a 3.5% Q4 GDP gain.  As it turns out, the 0.6% December business inventory gain they assumed will prove closer to a 0.1% gain...

With the likely revised GDP data, the inventory adjustment will be more contained in Q4, leaving less remaining potential for inventory subtractions from GDP in Q1 and Q2.