Today’s reports on the U.S. economy were seen as relative positives mainly because retail sales reported up for July. Econoday had this take on retail sales:
Major gains sweep the retail sales report for July, a month that benefited from an easy comparison with a very weak June. Total retail sales rose 0.8 percent for the strongest rise since February with ex-auto sales also up 0.8 percent for, again, the best showing since February. Ex-auto ex-gas the gain is 0.9 percent for the best showing since January.
All components show gains including motor vehicles, general merchandise, health & personal care, furniture, and restaurants. Clothing also shows a significant gain, one that points to strength for the back-to-school season.
As you can see the trend is still negative and has been negative for the past 12 months. That is because people are actually spending less and saving more because they are concerned about the economy. The only things that have been truly positive in the past year have been auto sales which are driven by low interest rates thanks to the Fed’s harmful ZIRP, lack of demand for credit, and a rush of foreign dollars seeking refuge in US Treasurys. Also, it seems, that people are frequenting restaurants and bars more often. So for one month we have a positive report and economists and analysts are “cautiously optimistic.”
The business inventories report showed for the first time in about 18 months that inventories climbed 5.0% YoY which would be considered to be a negative sign. Inventory stacks up as demand slows:
I don’t put much faith in these one month numbers on retail sales. There are enough reports on consumer confidence to show that people are concerned about the economy and our future. For example, today:
Small business are no less concerned. Today’s National Federation of Independent Business Optimism Index report says:
Dipping for a second consecutive month, after ending several months of slow growth, the Small Business Optimism Index gave up 0.2 points, falling to 91.2. The decline, while less anticipated given the Supreme Court decision on the health-care law and a flurry of activity surrounding the fiscal cliff, still leaves owner optimism disturbingly low and at recession levels. The Index has oscillated between 86.5 (July 2009) and 94.5 (February 2012) since the recession officially ended in June 2009. Prior to 2008, the Index averaged 100, well above the current reading. During the economic recovery, now three-years-old, the Index has averaged 90, making this the worst recovery period from a recession in the NFIB survey history (which began in 1973).
This doesn’t sound like a recovery in consumer spending.