Modest Retail Sales But Confidence Sinking Like A Stone

Retail sales figures from the Census Bureau reported modest increases for the month of July:

U.S. retail and food services sales for July … were $390.4 billion, an increase of 0.5 percent (±0.5%) from the previous month, and 8.5 percent (±0.7%) above July 2010. Total sales for the May through July 2011 period were up 8.2 (±0.3%) from the same period a year ago. The May to June 2011 percent change was revised from +0.1 percent (±0.5%) to +0.3 percent (±0.3%). Retail trade sales were up 0.5 percent (±0.5%) from June 2011, and 8.9 percent (±0.7%) above last year. Gasoline stations sales were up 23.6 percent (±1.7%) from July 2010 and nonstore retailers sales were up 14.1 percent (±2.8%) from last year.

While the modest growth is a positive note for the economy, I believe it is still driven by discounts or promotions which squeeze margins. Also, a substantial part of sales are driven by wealthier Americans, which shows that we still have a bifurcated economy. The last report on personal savings showed an increase (5.4%) a trend that has continued since March, 2011.

Part of the problem is that consumer confidence is down.

Gallup reported that:

Americans’ economic confidence plunged to -53 in the week ending Aug. 7, a level not seen since the recession days of March 2009. This deterioration coincided with the final wrangling over the U.S. debt ceiling and Standard and Poor’s downgrade of the United States’ debt rating. Economic confidence is now far worse than the -43 of two weeks ago and the -34 of a month ago.

As well, the Michigan/Reuters consumer sentiment poll also came out today, very negative:

The Reuters/University of Michigan index fell nearly nine points to 54.9 which is just below levels during the worst of the 2008 meltdown. This is nearly a record low, next only to the Iranian hostage crisis and oil embargo of the late 70s and early 80s. The expectations component, which is the leading component, fell more than 10 points to 45.7, again very severely depressed and near a record low. The current conditions component fell less severely, down more than six points to 69.3.

 Consumers can see through the political charade as well as the markets it appears.

Most Americans are very strapped:

A majority, or 64%, of Americans don’t have enough cash on hand to handle a $1,000 emergency expense, according to a survey by the National Foundation for Credit Counseling, or NFCC, released on Wednesday. Only 36% said they would tap their rainy day funds for an emergency. The rest of the 2,700 people polled said that they would have to go to other extremes to cover an unexpected expense, such as borrowing money or taking out a cash advance on a credit card. …

An earlier study by the same organization found that 30% of Americans have zero dollars in non-retirement savings. A separate study by the National Bureau of Economic Research found that 50% of Americans would struggle to come up with $2,000 in a pinch.

This is quite alarming, assuming this poll is valid. This June 2011 BEA data chart shows personal income unadjusted for inflation (ignore the chained dollars data):

If wages are flat, then what will drive retail sales? I know the answer to that and it isn’t ‘more spending.’ Of course, a new round of QE will help the financial markets and wealthy Americans’ spending, but that end of the bifurcated economy is not trickling down; the only boats floating are the beneficiaries of the financial markets. 

We see retail sales remaining flat to down for “an extended period.” 


4 comments to Modest Retail Sales But Confidence Sinking Like A Stone

  • mitch

    the cash on hand data is really sad. my values growing up were from austere germans who learned about saving in the depression, so i have always been one to save. i wonder how socialism will reward me for that in the future?

  • Linus Huber

    I do not know how to be a contributor but want to share my thoughts and get some comments or feed back by individuals interested in this subject. I apologize that it does not directly relate to the above topic.


    It has been generally accepted that extremely high compensation of individuals occupying the higher echelons of financial institutions are a matter of the market (supply and demand) where the most sought after managers justifiably are rewarded at those levels as they are able to produce enormous earnings for the concerned institution. The negative consequences for the safety of the overall financial system have been categorized to be some kind of natural catastrophe that has unidentifiable reasons and therefore gave justification for being rescued by governments the world over under the general heading that it is required in order to tame the markets that seem to act in unreasonable fashion. It takes a long time for the political process to change as the lobby of those financial institutions has been very successful to influence the legislator and media with the vast sums of financial resources available to them.
    Change will not come from within the political and business class but can be achieved solely by the electorate. The crimes committed are not yet obvious to the general populace and the effect of the lobbying efforts do still keep many confused and disoriented with regard to the reasons for the presently difficult economic situation. Still, slowly the average person starts to grasp the reality of what happened and with some additional education by a number of respected individuals who do not depend on those financial institutions for their wellbeing, a new wave of awareness will start to arise over the next few years.
    The political party that will use a new approach in this situation should be able to gain vast popularity by capturing the presently slow emerging mood of the electorate. The new approach should aim straight to the heart of the reasons that caused the present misery. Obviously the new ideas will be fought without mercy by the moneyed interests with their high public profile. Nevertheless, time works in favour of this new approach which aims to deal with those individuals who drove the financial system into the abyss in ways that must be considered just and fair and are correcting the various violations of the spirit of the rule of law perpetrated over the past many years. A rudimentary text serving as a base for the implementation of a law by the legislator is herewith proposed:

    Individuals that have been promoting and in some way are responsible for the creation of unsustainable and unmanageable debt levels within the economy and in this process have been enriching themselves with compensation (including all benefits) in excess of 10x average national income while not being exposed to any risk of loss or risk to their financial health are subject to confiscation of their entire accumulated wealth and to be led to a life at conditions experienced by the individuals presently unemployed. These individuals are forbidden to ever again be in a position to influence credit creation or similar aspects of the financial system.
    Obstructions to the identification process of said individuals are punishable with a jail term of no less than 2 years without parole. Entrepreneurs who risk/risked their own personal wealth (who can lose as well as win) are not subject to this law.

    This idea is to be seen in historical hence longer term change of public mood and therefore to be eventually introduced in the time frame of within 10 years. Change in public perception is not easy to foresee.

  • Linus Huber

    Thanks Jeff, well maybe I just felt an itch this morning but I feel compassionate about it.