Thursday, December 13, 2007

Upeat Consumers On A Spending Spree

WASHINGTON (Reuters) - Retail sales were solid in November as the holiday shopping season got underway, but a good portion of consumer dollars went to higher-priced gasoline.

WASHINGTON (AP) - It was the biggest sales advance in six months and reflected widespread strength in a number of areas from department stores to clothing shops and furniture stores.

Indeed, a closer look at today's Retail Sales report confirms that year-to-date consumer spending IS widespread - it's up from the same period last year in every retail sector except for "Building Materials" (only 8% of the market for total retail sales), due to weakness in the housing market.

And although consumer spending at gas stations increased by 5% this year, that is actually less than the gains in spending for clothing, food and health products. Further, if you take gasoline sales out of retail sales completely, consumer spending is still up 4.2% from last year. Higher gas prices contributed only 1/10 of 1% to overall consumer spending (see chart above)!!

Bottom Line: Despite the perception of widespread consumer gloom and pessimism, the November spending spree reflects a much more optimistic and upbeat American consumer.


At 12/13/2007 8:23 PM, Anonymous Anonymous said...

Most of this increase is actually inflation. All the buying of gas is great for jobs and the economy last time I looked.

At 12/13/2007 11:27 PM, Anonymous Anonymous said...

finster --

Not most, just half! :) Well, if the increase was twice what was expected, and half of that was due to fuel prices...

The LA times has a nice balanced commentary...

"On a brighter note, consumer spending, which accounts for about 70% of the economy, rose 1.2% last month, about twice what economists had forecast. Roughly half of that increase was caused by rising fuel prices...If you believe the retail sales number, you'd think we're in the midst of a boom. If you believe the [producer price index], you would think there's runaway, rapid inflation. I think neither one is accurate," said Joel Naroff, president of Naroff Economic Advisors, an economic forecasting firm in Holland, Pa."

At 12/15/2007 10:27 AM, Anonymous Anonymous said...

What role does real inflation play in this increase?

Everyone knows that the government published rate of inflation does not match their own experience. Prices have risen over 6% in the last year so how is it possible to say that there is a spending spree?

If goods and services really cost more real dollars (more than 6%) than last year aren't we really seeing a decrease in spending activity?

How can consumers be on an upbeat spree when they are spending more money but taking home fewer goods?


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