The 1.2 percent drop in May retail sales shows the consumer sector remains sluggish, says Joel Naroff, president of Naroff Economics.
That in turn has negative implications for economic growth, he wrote in a note to clients.
“Maybe the consumer has not decided that spending money is a good idea,” Naroff said.
“This was a weak report that points to more sluggish consumer spending than many expected. But it also supports my view that GDP growth will be modest, and that includes the current quarter.”
The problem isn’t that people are staying away from malls, Naroff says. It’s that they aren’t spending money once they get there.
“This is a warning to investors that the road to rising equity markets remains filled with economic tank traps,” Naroff wrote.
“That is also the Fed’s concern, though Mr. Bernanke seems to be fairly certain that the way will be cleared and the economy will not falter.”
Fed Chairman Ben Bernanke said in recent Congressional testimony that the economy is recovering nicely.
But he also said the rebound is precarious enough so that fiscal and monetary stimulus shouldn’t be reversed immediately.
Naroff isn’t the only one who sees weakness in the consumer sector.
“It’s unreasonable to expect rapid spending growth in this environment,” Zach Pandl, an economist at Nomura Securities, told Bloomberg.
“Businesses are being cautious about hiring. We have a huge amount of ground to cover to make up for the jobs lost.”
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