Consumers say “hold my beer” to DOOOMing about Sales
– by New Deal democrat
Retail sales is the first of two very important indicators we got this morning. Per yesterday, with employment growth “dead in the water” since April, consumer spending – which leads future employment – is the single most crucial element of a turning point.
It really is incredible how it takes a major shock for American consumers to cut back on spending. Because in August nominally retail sales rose 0.6%, confirming the very positive weekly data that has recently shown up in Redbook. Additionally, July was revised 0.1% higher, from 0.5% to 0.6%. After taking into account consumer inflation in August, which rose 0.4%, real retail sales rose 0.2% for the month, after a 0.4% increase in July.
This means that real retail sales are now at their highest since January 2023, as shown in the graph below (blue):
The above graph also shows real personal spending on goods (gold, right scale), which is a broader measure and tends to trend similarly to retail spending, but won’t be reported until the end of this month.
Further, with several exceptions, most notably in 2022-23, in the past 75 years whenever real retail sales turned negative YoY, a recession was about to begin or had just begun. If it was positive and not sharply decelerating, a recession was unlikely in the immediate future. At present real retail sales are higher YoY by 2.1%, so there is no sign of any imminent downturn in the economy:
Finally, because consumption leads employment, here is the updated graph of real retail sales YoY, together with real personal consumption of goods compared with nonfarm payrolls (red):
Based on historical experience, after the last two good months, real retail sales now suggest that YoY jobs growth will not roll over, but remain in a similar weakly positive range for the next several months.
The big question continues to be whether the continuing chaos of the imposition of tariffs at the highest rate since Smoot Hawley in 1931 creates enough of a shock to derail consumers. So far, (at least perhaps at the top end) it most emphatically has not.
“July retail sales: consumers party on, for now,” Angry Bear by New Deal democrat
Isn’t it time to start asking what is driving consumer spending? Since half of consumer spending is a result of spending by the top 10%, that’s a good place to start. Well, the S&P is up over 12% so far this year, quietly building wealth and confidence. Those 3% mortgages from a few years ago are mostly still in place, losing real value while debt service holds steady and salaries increase, releasing buying power. Bottom line–it’s a great time to be affluent in America. So why wouldn’t affluent folks indulge in dropping bucks on trash and trinkets, gourmet dining, and exotic vacations?
Why would anyone expect consumer spending to drop until the top 10% start to get squeezed, which means, of course that the bottom 50% get really squeezed?
John:
Why did 3 million people not vote? Why did TR_mp return to office after his performance in his first presidency. Second time voters rejected a woman and this time a woman of color. Figure it out. To the economy?
Pretty good summation here: Top 10% account for nearly half of all consumer spending: Nexstar Media Report
Mark Zandi has a few comments on this September 2025:
For those in the bottom 80% of the income distribution — making less than about $175,000 a year — spending has simply kept pace with inflation since the pandemic. However, the top 20% of households have fared far better, and those in the top 3.3% of the distribution have done “much, much, much better.”
The result is a U.S. economy that is largely being powered by the well-to-do — a potential point of weakness.
“As long as they keep spending, the economy should avoid recession, but if they turn more cautious, for whatever reason, the economy has a big problem.”
For now, things are good and especially good for the upper 10%. However, many Americans are struggling due to higher inflation, weaker job growth, and the threat of a return of “stagflation.”
You seem intent on attributing Trump’s win entirely to misogyny and racism, while dismissing the role of kitchen table economics. Of course, that argument is bolstered by the fact that many macroeconomic indicators pointed to a “glorious” Biden economy, while dismissing the economic conditions faced by the average voter.
Zandi is one of the few economists who addresses the issue of the “glorious” economy being largely attributable to the top 10% while the vast majority muddle along, something that was equally true a year ago. So, tell me– why wouldn’t voters in the bottom 90% have wanted to throw the bums out? Attributing voter motivations to misogyny and racism simply provides cover to Democrats trying to avoid the economic situation of the majority.
As for your trope that Biden would have won if millions of voters had not sat out the election, the NY Times has provided solid evidence that that is simply not true: If Everyone Had Voted, Harris Still Would Have Lost – DNyuz
@John,
“. . . why wouldn’t voters in the bottom 90% have wanted to throw the bums out?”
Because replacing them with grifters and fools under a narcissist who only wants to help the 1% and corporations would be worse.
Hope that helps.