Retail sales surprise on the good side

In the month of July, U.S retail sales were much stronger than expected, growing for the first time in 3 months.  Specifically, the U.S. Commerce Department recorded an increase of 0.4%.  Most of this increase was made up of increased spending on automobiles and gas.  Sans car purchases retail sales were still up 0.2%.  Basically these results were in line with expectations.

Analysis: I consider these to be good results in the face of such stiff economic headwinds experienced since the beginning of May.  Consumers are spending more despite the fact that their incomes and the overall employment situation have not improved.  That means that there is a whiff of stabilization in the mood of the consumer.  However, this mood should not be considered positive, just more stable…stable, but fragile.  Still, given the talk of a double-dip recession, more jobs lost, declining corporate profits, and all of the other doomsday scenarios circulating, this has to be considered a positive result.  Hopefully this results in some resiliency in the financial markets and some back bone on the part of consumers.  But it would be hard to bet on that.

Right now, the “game of chicken” that I have been describing for over a month is still strongly in place.

Importance grade: 7; while encouraging, these numbers would be made even more important if there were a commensurate upsurge in consumer confidence.  And I don’t think that is forthcoming until hiring improves.

Jason