Buffett Was Right. The Recession Really Is Over

R.I.P., Great Recession (December 2007-June 2009).

Last month, the National Bureau of Economic Research chiseled the above epitaph in stone, declaring the official end of the most savage economic downturn since the Great Depression. Of course, Berkshire Hathaway (NYSE: BRK-B  ) knew this already, and was telling us about it, a whole year before NBER. But don't blame the bureaucrats for tardy reporting -- they weren't the last to know. As it turns out, American consumers are only now beginning to acknowledge that the world hasn't ended:

According to the Commerce Department, which released its latest report on retail and food services sales on Friday, September was a mediocre month for sales improvement in comparison to August, but an absolute blockbuster compared with where we were a year ago (incidentally, when Buffett was making his pronouncement). Month to month, sales in this industry grew a modest 0.6%, but year over year, sales were up a boffo 7.3%.

Even better, September's gains marked an acceleration in consumer demand. Third-quarter sales as a whole rose only 5.7%, so it looks like things really got swinging toward the tail end of the quarter.

A few caveats and provisos
Now before you go popping the Champagne corks and rush out to buy shares of Zumiez (Nasdaq: ZUMZ  ) and Abercrombie & Fitch (NYSE: ANF  ) -- the top two retailers for comparable sales gains last month -- there is just one quirk in the data I'd like to highlight for you. See that light grayish column up there on the right? (The one in the chart on the right. That's the one.) Seems automobiles contributed heavily to September's super sales success. Wonder why that might be?

Well, think back to September 2009 -- the month to which we're comparing September 2010. Cash for Clunkers had just ended, and automobile sales were in freefall. Chrysler sold 42% fewer cars than it had in September 2008. General Motors' sales were down 45%. Why, even Ford (NYSE: F  ) and Toyota (NYSE: TM  ) experienced sales shortfalls.

So the September-over-September auto sales gain was a bit of a fluke, a one-time deal. What's more, if you back out those gains, you wind up with retail sales for September that are right in line with retail sales for the rest of Q3. In other words, there wasn't really an acceleration in sales at all. Aside from the car sales bump, Q3 basically just plodded along.

Which admittedly, doesn't make for happy-sounding headlines -- but reality rarely does.

Got a different read on today's chart? Don't be shy: Tell us about it in the comments section below.

Fool contributor Rich Smith does not own shares of any company named above. Rich is not a licensed economist, but he plays one on the Web. Check out his latest stock recommendations on Motley Fool CAPS. The Fool has a disclosure policy.

Berkshire Hathaway is a Motley Fool Inside Value selection. Berkshire Hathaway and Ford Motor are Motley Fool Stock Advisor picks. Zumiez is a Motley Fool Hidden Gems choice. The Fool owns shares of Berkshire Hathaway.

True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community.


Read/Post Comments (8) | Recommend This Article (14)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 18, 2010, at 7:24 PM, langco1 wrote:

    the recession has beeen over for almost two years the problem is as everyone but washinton knows we are in a depression!!

  • Report this Comment On October 19, 2010, at 12:51 AM, TMFDitty wrote:

    Touche.

  • Report this Comment On October 19, 2010, at 2:14 AM, JackCaps wrote:

    On 9/22/2010, Warren Buffett of Berkshire Hathaway Inc. was interviewed by CNBC's Becky Quick. This interview included the following discussion.

    Quick:

    The NBER said this week that the recession officially ended back in June of last year.

    Buffett (laughing):

    Yeah, well they define it differently than I. I define it; I think we’re in a recession until real per capita GDP gets back up to where it was before, that is not the way that National Bureau of Economic Research [NBER] measures it, but I will tell you that to any, on any common sense definition; if the average American is below where he was before, and his family, in terms of real income, GDP; we're still in a recession. And, we're not gonna get out of it for a while."

  • Report this Comment On October 19, 2010, at 1:15 PM, Ironbob wrote:

    There's no such thing as a recovery from recession when you have almost 10% unemployment. Anyone who says differently is either retarded or has an agenda.

  • Report this Comment On October 19, 2010, at 1:20 PM, BrianFooley wrote:

    Two thoughts, rather cliche... wall of worry and unemployment is a lagging indicator. But then again, we can always have a new separate recession, especially if China is a bubble that pops.

  • Report this Comment On October 19, 2010, at 2:19 PM, brizzlekizzle wrote:

    I wish I had your enthusiasm, but I don't.

  • Report this Comment On October 19, 2010, at 2:38 PM, lonelyposeur wrote:

    Kinda hard to today, damn i'm glad it at least feels great outside!

  • Report this Comment On October 19, 2010, at 2:59 PM, polenium wrote:

    The recession is over for Buffet but not the rest of the country. Goldman Sachs is doing fine and will be as long as banks can continue stealing homes.

    You need a healthy middle class to have a healthy economy. We have a shrinking middle class.

    There is no such thing as a jobless recovery.

    Obama promised us that we would get the same deal as Buffet. He'd better get busy.

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