Wikinvest Wire

Retail sales stumble

Friday, September 12, 2008

The artificial support of government stimulus money and soaring gasoline prices have now been removed from the retail sales data revealing a sobering trend for an economy that counts on personal consumption for more than two-thirds of economic growth.
IMAGERetail sales in August declined 0.3 percent and the July data was adjusted downward from minus 0.1 percent to minus 0.5 percent. Excluding automobiles, sales fell 0.7 percent in August, the biggest drop so far this year.

Home improvement retailers continue to suffer. After big increases during the housing boom, sales at building material and garden equipment dealers have now declined during 19 of the last 29 months and are 2.4 percent below last year at this time in nominal terms (remember that none of the retail sales data is adjusted for inflation).
IMAGEAt home furnishing stores, the situation is far worse as the foreclosure and credit crisis drags on and fewer homeowners feel the need to "spruce up the place" with trips to Ikea or Pottery Barn.

Furniture and home furnishings sales declined during 14 of the last 19 months and are now 6.8 percent lower than last August.
IMAGESpurred by dealer incentives, automobile sales surged in August (up 1.9 percent) after a big decline in July (down 4.3 percent) as prices for new and used cars are reportedly tumbling amid weak demand.

As this relates to the third quarter economic growth statistics, many analysts now expect a decline in nominal personal consumption during the July-August-September period for the first time in 17 years.

When combined with a reversal in the trade data that buoyed second quarter growth, economists are revising third quarter growth estimates downward with some now expecting another negative number to surface when the advance estimate is released at the end of October. Recall that the fourth quarter growth of 2008 was recently revised downward to -0.2 percent, the first quarter of negative real economic growth since 2001.

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Danielle Park said...

Good post Tim. Added you to my blog roll this morning: Cheers, D

Tim said...

Thanks - just added yours to mine.

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