How are the holiday sales?

Retail sales increased by 0.8% in November according to the U.S. Commerce Department.  This result compares to an economists’ expected rise of 0.5%.  Additionally, October’s retail sales figures were revised up 1.7% from their previously reported 1.2%.

Analysis: The first thing that I want to draw your attention to is that all of the economic data that have been coming out in the last several months are positive, even if modestly so.  Next, all of the revisions that are occuring are upward modifications to the data.  Clearly this is a positive sign.  I feel that it indicates that, barring any outside shocks to the system, the U.S. consumer is finally gaining some confidence.  In turn, that should lead to additional growth in spending and that, in turn, should lead to businesses finally getting off of those piles of cash they are hoarding and actually hire some folks.

However, and this is a big however, the data are still very modest.  Back in the roaring days of the twin bubbles of the dot.com era and the real-estate era, retail sales were routinely up in excess of 3%.  Clearly, the current data are a long way from approaching those kinds of figures.  For each of us, the important question is whether or not the Great Recession has permanently changed the behavior of a generation of consumers?

If the answer is yes, then the economic expectations that were created by 40 years of electric growth have to change.  However, that the U.S. consumer lives within his or her means is a good thing for the sanctity and health of the United States in the long-run.  If the answer to the question above is no, then in the short run (2-10 years) the world’s economy will report strong numbers.  But the results will be dependant on a culture of spending  beyond one’s means that is unsustainable.  Me?  I prefer the former situation.

But what would the world look like without its “growth-growth-growth” religion?  That, I promise is the topic of another blog post at some point in the future.

Importance grade: 6; while the data are encouraging, I consider them to be lukewarm in magnitude, but SOLID.  That is, the U.S. consumer is finally getting comfortable with the economic reality on the ground.  Barring any unforeseen catastrophic events, the mood of the consumer will improve slowly.

Jason