Posts Tagged ‘Retail Sales’
March retail sales signals tougher conditions for consumers
Retail sales (nominal) for March came in stronger than expected, with a 0.2 % increase in sales since February. Despite the positive number, signs of economic weakness is prominent, as consumers are experiencing tougher conditions as food and energy prices are souring. While nominal sales are positive, inflation adjusted sales are likely negative.
Spending on gasoline products increased by a total of 18.9 % since March 2007. Other categories such as motor vehicles (-3.2 %), home furniture (-7.1 %) and building material (-6.9 %) all experienced negative changes. The decline in categories, such as, home furniture and building materials, were to be expected because of the ongoing deflation of the housing bubble.
With overall consumer spending on $380,177 million, up from $379,742 million of last year, a merely 0.1 % change, consumers have been shifting some of their spendings, away from other goods, to maintain their consumption of gasoline products. This has resulted in a decline in real consumption, and adding additional pressure to the average consumer. By this shift, it should be clear how elastic the demand for energy and food has been. (Something FED does overlook in their preferred measure of inflation.) With payrolls in decline and unemployment rising, a further surge in commodity prices will eventually result in squeezing margins and reduced spending for many households.
It should be remembered that the importance of retail sales are often blown out of proportion. The reason for this is that consumer spending consists of 70 % of GDP. However, GDP does only provide a part of the puzzle determining economic growth. Compared too total economic spending, consumer spending does merely constitute about 35-40 %. I have commented on this fact before, here.
