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.”