Retail Sales Are Better Than the Dismal Forecasts


The economy will grow at 2% this year, same as last year, which keeps us out of recession but does nothing for the jobs picture.

Associated Pravda: The U.S. Commerce Department reported that retail sales, part of consumer spending, which is an important economic indicator, went up for the fifth straight month to 0.5%, better than forecasts. What they didn’t add was the government forecast was so dismal that anything would be better.

Here’s the fact they left out – growth would need to be nearly double the third-quarter rate — consistently — to make any real dent in unemployment.  Another problem is this growth came after consumers spent more while earning less, a trend that economists don’t believe can be sustained. In addition, much of the growth is due to expenditures on iphones, ipods, and ipads because they came out with new products.

The report that determines these figures has some problems too.

Consumer spending accounts for 3/4 ths of the GDP and retail sales are 1/3rd of that. To get the figures, the Bureau of Census contacts thousands of retailers who sell physical products only. The report doesn’t do the best job of tracking U.S. expenditures since we are a service-oriented society and that is not tracked at all.The part of the report that tracks consumer spending is “retail sales excluding autos”and that means it also excludes services as you might guess. The last report has that growth as 0.7%.

Another problem is they only track nominal dollars so a store might have sold the exact amount of goods, not more. They might have simply raised the price 10%.

The report is also broken down into durable (products with a life of three years or more) and non durable (life of less than three years) products. Autos make up 60% of the durable goods, which is 35% of retail sales.

Then we have the stocks wobbling because the EU, Italy and Greece at the moment, is not doing what they need to do. Unfortunately, we are no different because our super committee is planning to kick the can down the road yet again, but that is for another story.

This from the AP – “…Higher interest rates on government debt issued by Italy, Spain and other European countries rattled stock markets in Europe early Tuesday. The market rate for Italy’s 10-year bond jumped back above 7 percent. When rates crossed the 7 percent threshold last week, it raised worries about the country’s ability to manage its debts. Greece, Ireland and Portugal were forced to seek financial lifelines when their borrowing rates crossed the same mark…”