Retail Sales flat implies Capital Income is consuming less
From an article posted at ABC News, US Retail Sales Flat in July…
“U.S. retail sales were essentially flat in July, providing evidence that consumers have yet to shed their doubts about the economy despite recent job gains.
The Commerce Department said Wednesday that seasonally adjusted retail sales were unchanged in July compared with the prior month. Total sales rose a statistically insignificant $161 million from $439.6 billion in June.
The figures suggest that Americans are hesitant to spend, which could limit growth for the economy.”
As I have written before, many economists expect the economy to grow upon job gains. However, they underestimate the capacity of capital income to reduce its own spending as the stock markets and other asset markets stall out.
So retail sales being flat was something I foresaw. The significance of this though is that economic growth will be muted, even as labor seems to be increasing its income. The problem is that capital income obtained a high level of consumption after the recovery. And capital income tends to reduce spending toward the end of a business cycle to protect their gains. Their reduction in consumption is now sufficient enough to neutralize much of the consumption gains by labor.
i wouldnt put too much stock in one advance report; it’s from a pretty small sample & i’ve often seen them reviised +/- 0.3 or 0.4 percent in either direction by the next month…
sales over the past 3 months are up 1.5% over the previous 3 months….so that’s still growth at a 6.1% annual rate..
Rjs,
The trend is down. Macy’s profits came in short. They did that on lots of price discounts. The word in the market is that other retail companies did not have as many discounts. Walmart reports Thursday as will other companies.
My view is that Macys, Nordstrom and other retailers that serve the rich are going to feel the cutback by those who live off of capital income.
It may be a small sample, but the pattern is there.
Sorry Lambert, Retail Sales rocketed in the 2nd quarter and there really wasn’t much of a “decline”. Saying Macy’s profits are “flat” is stupid. lol stupid.
Hi John,
Did I say macys profits were flat? No… I said they came in short. That is what the news said. The news also said that meant lower sales for other retailers.
I hear your selective perception to make an error where none exists.
something else odd, Ed; seasonally adjusted sales are up 3.7% year over year, but the unadjusted data indicates they’re actually up 4.2%…that divergence may be because 2009’s unusual data was dropped from the algorithm this year…
July unadjusted sales were reported at $446,251 million, up from $438,735 million in June but down from $464,429 million in May…
my broader point, though, is stall that with all that’s in play with these numbers, you shouldn’t hang your hat on one month’s advance data…