THE TREND IN RETAIL SALES IS WEAKENING
By Bondsquawk:
Retail Sales for April declined by a 1.2 percent which is a disappointment after economists expected a rise of 0.2 percent. Goldman Sachs says that the headline is misleading and is less disappointing. However, the overall trend is still relatively weak.
Two special factors make the sharp drop in the headline a misleadingly weak read on retail spending in May. First, the building materials component, which had risen sharply in March and April due to a federal stimulus program for “clunker” appliances, gave back almost two-thirds of the 17% (not annualized!) surge during those two months. Also, receipts of gasoline stations fell 3.3% on the month (also not annualized) as prices at the pump failed to post the increases that normally occur in May.
By stripping out business materials, gasoline, and autos, core retail sales rose 0.1 percent which Goldman Sachs describe as “anemic” after following a 0.2 percent drop in April.
Taking the April/May average relative to the first quarter, the data now suggest about a 3½% annualized increase in (nominal) consumer spending on goods other than vehicles, as compared to nearly 8% in Q1. So the report does support the case for a slower growth rate in real consumer spending even after the distortions are stripped away. As a result, we see no reason to change our estimate that real consumer spending is rising at about a 2½% annual rate in Q2, down from 3.5% in Q1.
In addition to the Retail Sales report, consumer sentiment appears to be improving as the Univeristy of Michigan released its figures for June. The sentiment index increased from 73.6 in the prior period to 75.5 which exceeded surveys of 74.5. BNP Paribas wrote that
Lower gasoline prices appear to have boosted consumer optimism. 5-10 year inflation expectations, the figure tracked by the Fed policy makers, eased to 2.8% from 2.9% previously closer to the lower end of the historical range.
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More on this topic (What's this?)Is the Retail Sales Pullback a Blip or New Trend? (Wall St. Cheat Sheet, 6/11/10)Retail Sales down in May (Keep My Dollar, 6/11/10)Retail Sales Drop – As Expected (Stock Market Analysis, Trading, ..., 6/11/10)Surprisingly, retail sales rise (The Mess That Greenspan Made, 3/12/10)
Some people speak of reflation as a solution but that can be quite difficult to achieve in practice. Should the government hire vast numbers of hole diggers and fillers to gin up price inflation and a wage-price spiral? Well, there are potholes to be fixed and bridges to be rebuilt but in general government wastes resources, so no, that is no solution as Japan demonstrates.
How to achieve reflation then? The solution is radically simple but it gives away the looting game that is government backed fractional reserve banking in a government enforced monopoly money supply. That solution is to bailout the borrowers and savers with newly created, debt free legal tender fiat that is just GIVEN, not lent to the population.
The long term solution, as any true libertarian intuitively knows, is true liberty in money creation and acceptance. That would involve the repeal of legal tender laws, the abolition of the capital gains tax, the allowance of private money supplies, the abolition of government deposit insurance, etc.
Shall we get prudently radical, based on principles of justice or shall we let things get out of hand and risk unprincipled, dangerous solutions?
I AM SO TIRED OF THESE DUMB ASS (oops sorry, left the caps on) consumer sentiment reports that were designed 50-60 years ago that call 500 people.
hell, can’t some face book google creating genius make a simple IPHONE app that allows people to simply rate the state of the economy on a 1 to 10 scale based on the guy/gals vote at the next gas pump over?