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American consumer: "I'm not dead yet!"
Wednesday, June 13, 2007
The retrenchment of the spendthrift American consumer has been oft-predicted but never realized. Once again, this morning's surprising increase in retail sales shows that betting against shoppers in the U.S. continues to be a losing wager.
The Commerce Department reported that despite high gasoline prices, consumers saw fit to ratchet up their spending on other items, overall retail sales climbing 1.4 percent in May after an upwardly revised decline of 0.1 percent in April. The increase in May was the largest in 16 months.
On a year-over-year basis, retail sales are now up 5.0 percent, an improvement from last month's annual gain of just 3.1 percent. The trend of the last year and a half remains decidedly downward, however, consistent with other economic reports signaling a second quarter rebound, consumers appear to have a new bounce in their step.
During a period when long-term interest rates are rising rapidly and the nation's housing market continues its swoon, how long the bounce in their step will last is another question.
Expenditures at gasoline stations posted a monthly increase of 3.8 percent, but gains elsewhere were broad-based led by clothing and clothing accessories stores (up 2.7 percent) and building material and garden supply stores (up 2.1 percent).
Yes, some people are still shopping at Home Depot and Lowes.
Excluding gasoline sales, the source of many rosy headline numbers over the last eighteen months, sales would still have been up 1.2 percent.
It's hard to imagine where all the money is coming from to fund these purchases. Mortgage equity withdrawal has been declining rapidly and last week's consumer credit report showed a decline in new credit card debt for April. When credit card purchases for May are totaled, the answer may be known.
Surely, the current increase in spending didn't come from current income - that would be almost un-American.
Contributing a record-high 72 percent to economic growth (for better or worse), consumer spending is vital to the U.S. economy and this surprisingly strong retail sales figure adds to the growing pile of data pointing to a bounce in the second quarter from an anemic, annualized real growth rate of 0.6 percent in the first quarter.
The first look at second quarter GDP will be reported at the end of July.
6 comments:
maybe there is an increase in un-reported income??
Is there any possibility that buoyant consumer spending is linked to the supposed lack of inflation we're experiencing?
First, I noticed that the Commerce Dept. report says the figures aren't adjusted for price changes,which is interesting. But my thought is this: if consumers are maintaining a constant level of spending adjusted for true inflation, but the figures are reported adjusted for reported inflation or not adjusted at all because inflation is "just so low," then could it appear that consumers are spending more, when they are actually keeping pace with inflation, or even falling behind.
Obviously there are flaws with this hypothesis - primarily that most of the inflation seems to be occurring outside of the core consumer goods relevant to this measure. And, of course, wouldn't want to disparage the ability of the American consumer to spend more and more and more! But I think its interesting to consider as another possible impact of unrealistic-seeming inflation numbers and non-existent money supply numbers.
The figures are not adjusted for inflation, so if spending is rising 5 percent and "inflation" is up only 3 percent, then that's "real" growth.
However, if "inflation" is really much higher than the government reports, as many Americans are just beginning to suspect, then mid-single digit annual gains in retail sales are not that impressive.
Tax refunds perhaps?
Import prices are starting to nudge up due to the continued decline of the dollar... I wonder if that is what we're really seeing here in terms of more spending on "clothing an accessories".
Anyway, the key part of this picture is that YOY change in retail sales growth. The recent-month "jump" is little more than a statistical bump. The fact that downtrend is preserved and the last long-term peak immediately preceded a recession should be rather ominous to the goldilocks gang.
anony above, brilliantly simple.
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