Today's headline number on retail sales suggests things are improving. I say not so fast.
The improvement over last month simply got us back to where we were two months ago.
Both consumers and small businesses have little confidence in a marked improvement anytime soon.
Consumers Hit Stores, But Companies Aren't Buying It says this about the improvement in retail sales:
"Americans are starting to spend more in stores this back-to-school
season, but companies still aren’t willing to bet on a big consumer
rebound by stocking up on goods—at least not yet.
Retail and food-service sales jumped a higher-than-expected 0.8% last month, the Commerce Department
said Tuesday, after falling for three months in a row—including a nasty
0.7% drop in June and a 0.1% slip in May. Yet other economic reports
out today suggest sentiment among firms remains glum and re-stocking—a
gauge of companies’ expectations of future demand—remains muted.
Inventories at U.S. businesses edged up only 0.1% in June as weak demand for goods kept firms from increasing their stockpiles. Meantime, a measure of confidence among small-business owners in July by the National Federation of Independent Business dropped again as firms worried about their earnings.
When businesses expect healthy sales in coming months, they stock up
on inventory. In the second quarter of 2012, such stockpiling gave the
economy a minor boost, contributing 0.32 percentage point of the
nation’s 1.5% annualized rise in gross domestic product.
But it’s probably too early for U.S. businesses to be in anything
other than “wait-and-see” mode given weak domestic demand, global
economic concerns, European turmoil and the U.S. election.
auto sales—which can be volatile—July’s 0.8% jump in retail sales simply
offsets a similar drop the month earlier. Americans still aren’t
consistently using their credit cards more, Fed data show. And rising
gas prices and food prices—due to the drought—could hurt the American
consumer even as the job market improves.
The upshot: Muted growth in stockpiles suggests the dial hasn’t moved
much for businesses: They still don’t expect a big bump in sales in
coming months, or are too worried about economic volatility to really
stock up. At the same time, they’re not sitting on huge amounts of
inventory, which suggests they haven’t been left holding the bag from
sluggish sales, either."
And Optimism Among Small Businesses Droops Again adds to the less-than-good news:
owner confidence fell a bit further in July, dragged down by worries
about earnings, according to data released Tuesday. . . .
The report in general was downbeat about business conditions among
small businesses. The view isn’t surprising given the other weak data
reported in economic sectors from manufacturing to retailing.
“The Index has averaged 90 in this recovery, now 3 years old and is
the worst recovery period from a recession,” since 1973 when the data
began, said the report. . . .
Small business owners don’t expect business activity to improve much
in the next six months."
We're still likely to avoid another recession in the U.S., but it's no sure thing by any means.
That said, at least we're farther from the recessionary cliff than Europe, small consolation that that is.
Wouldn't it be nice if the government got out of the way, and stopped dividing Americans from one another?
But that won't happen at least until after this fall's election, and maybe not even then.