Retail sales finally up

For the month of August retail sales were up 2.7%. This compared to a consensus expectation of up 2.0%. This kind of big outperformance, 35% to be exact, is encouraging and suggests that the virtuous circle of “good stock market performance leading to increased consumer confidence leading to additional spending leading to better profit performance leading to better stock market performance” is gaining some momentum.

Most of that increase in sales was driven by the “cash for clunkers” program’s contribution of 1.6%. So ex auto sales, retail sales were up 1.1%. Yet, if we take out the 0.5% rise due to increased gas prices retail sales were up 0.6%. While this is barely more than a “statistical error” of increase, it is only the second time in six months that retail sales were up.

I would expect retail sales to continue to be muted in increases until the unemployment situation improves for several months. Once the news gets out that companies are hiring again people will start to relax their collective sphincter and begin buying some of the things that they have been putting off (and hopefully saving for).

Jason