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More mixed signs out of the consumer sector this morning.  The ICSC same store sales report came in at 0.4% on a year over year basis.   Although nothing spectacular, this is marginal improvement over recent readings.   The Redbook data continues to show a sharp decline in retail sales.  Sales came in at -4.2% for the year over year data.

Meanwhile, productivity and labor costs continued to display the cost cutting environment that is driving corporate earnings.  Productivity jumped to a better than expected 6.4% while unit labor costs continued to decline.  This is a direct result of the jobless recovery and the massive cost cutting across the board.   Econoday reports:

Productivity and labor costs in the second quarter showed sharp improvement in the second quarter-suggesting a favorable profits picture for many companies despite the recession. Second quarter productivity posted a sharp gain of 6.4 percent annualized, following a revised 0.3 percent rise in the first quarter. The second quarter boost came in above the consensus forecast for a 5.5 percent increase. Although layoffs are hurting the consumer sector, businesses are seeing their costs improve. Unit labor costs fell an annualized 5.8 percent after dropping a revised 2.7 percent in the first quarter. The market had expected a 2.8 percent decline for the latest quarter. The jump in productivity and drop in unit labor costs were due to hours worked falling much faster than output. Hours worked plunged an annualized 7.6 percent while output edged down 1.7 percent. Year-on-year, productivity rose 1.8 percent in the second quarter, following a 1.0 percent gain the previous quarter. Year-ago unit labor costs slipped to down 0.6 percent from up 0.5 percent for the first quarter.

The main takeaway here is that the consumer data continues to come in mixed/negative.  The very poor consumer data is likely to accurately project the strength of any impending recovery.  As of now, it’s safe to say that the recovery will be weak.

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