September Retail Sales
Sales: Up 1.1 percent; Excluding Vehicles: Up 1.1 percent; Excluding Gasoline: Up 1.0 percent
IN A NUTSHELL:
“Don’t blame consumers for the slow job gains, as they are doing all they can to pump up growth.”
WHAT IT MEANS:
We are constantly hearing tales of woe coming from the corporate sector. “Earnings are decent, but we are worried about the future, so we are not going to hire.” Well, it appears that households don’t share that same concern.
People are spending money like crazy, as retail sales surged in September, making it the second consecutive month that demand was up over 1 percent. And it wasn’t as if July was weak, as retailers saw a strong 0.7 percent increase.
In other words: “Summertime, and the spending was easy” (my apologies to George Gershwin).
This was a universally strong report that was not driven strictly by rising gasoline prices. Even excluding gasoline, spending jumped.
The iPhone5 might have helped power a robust gain in the previously slumping electronics category, and as we already knew, vehicles flew off the lots, if it is possible for vehicles to fly.
Sales of furniture were solid, we went to restaurants and indulged in clothing and sporting goods purchases. We even spent a lot of time on the Internet finding the deals.
There was a large increase in supermarket purchases, but food costs did increase. The only place that seemed to have trouble attracting customers was department stores, where sales fell.
MARKETS AND FED POLICY IMPLICATIONS:
The disconnect between households and executives couldn’t get any greater, as consumers are spending, while business leaders are pulling back.
Even adjusting for inflation, retail sales look like they rose by over 3 percent during the summer, and that should generate a strong consumption number when the third quarter gross domestic product report comes out on Oct. 26.
The weakness in Europe and Asia might be an issue for some companies, but that doesn’t mean the U.S. economy is faltering: It is not.
Indeed, with housing clearly on the rise and consumer demand solid, it is hard to make the argument that conditions are soft.
So why is hiring so desultory? I can only assign it to the failure in Washington to do what has to be done: Compromise on a long-term spending cut and revenue increase plan and move on. Political games might be fun for the political class, but clearly it is doing harm to the economy, as the growth in consumer demand we are seeing should be generating accelerating not decelerating payroll gains.
What the recent economic reports suggest is that once the fiscal cliff issue is cleared, payroll and economic growth should surge regardless of the election results.
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