“In case you haven’t seen a sales report these days, February MTD (month to date) sales are a total disaster. … The worst start to a month I have seen in my ~7 years with the company,” said Wal-Mart’s vice president of finance and logistics in a Feb. 12 email that was obtained by Bloomberg. The story has been all over the financial media since Bloomberg published the story containing the email excerpts as well as other internal emails last Friday. The emails are actually quite frightening when analyzing the story a bit more.

The emails clearly show that Wal-Mart sales are awful. The emails blamed the payroll tax break and delayed tax refunds for the poor sales.

Two aspects of this story have been underplayed by analysts, reporters, economists, etc. The first part has got a bit more coverage, and we will start with that point.

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Some in the media have picked up on the basic point that if Wal-Mart has poor sales, competitors are as well. Despite, the media’s obsession with high gun sales, Wal-Mart still had extremely poor sales. One can only imagine how emails from competitors that cater to similar demographics are faring.

Wal-Mart has some of the lowest prices around, so if a small hike in the payroll tax hurt sales so much, competitors were likely hit even more. I bring up this point to show how the economy could be far worse than many imagine. The whole retail sector is likely hurting, which does not fare well for the economy considering consumer spending makes up 70 percent of gross domestic product.

But here is the second point everyone seems to miss. The recent emails came from high up executives at Wal-Mart; it is not the observation of one employee at the 1.3-million-person company. The vice president of finance knew that the payroll tax was not being extended, and tax refunds would be delayed after the GOP and Obama reached a deal in early January to avert the fiscal cliff. Yet just a few weeks later this executive is commenting on how disastrous sales in February are.

This second point leads to two conclusions: 1) the executive underestimated how large of an impact the expiration of the payroll tax holiday and delayed returns would have on spending; and 2) the economy is getting worse. The worsening economy is unrelated to taxes.

The leaked emails contained a careful analysis of the impact of tax delays and the impact on Wal-Mart’s sales. Therefore, the first possibility seems less likely to me. The second conclusion that the economy is in big trouble seems far more likely.

We will not know for sure how bad the economy is until we get more economic numbers for February. However, for now, it appears that after President Barack Obama’s trillions of dollars spent on “stimulus” and interest rates at zero for over four years, the economy is still in trouble.

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