The Atlanta Fed's macroblog provides commentary and analysis on economic topics including monetary policy, macroeconomic developments, inflation, labor economics, and financial issues.

Authors for macroblog are Dave Altig, John Robertson, and other Atlanta Fed economists and researchers.

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May 09, 2007

Is The Consumer Ready For A Standing Eight Count?

The Wall Street Journal's Christopher Conkey and Phil Izzo think maybe so (page A4 of the print edition):

Signs are emerging that American consumers may be getting tired of carrying the economy. How much they pull back will be a major factor in whether the U.S. economy keeps slowing or whether the pace of growth perks up.

Consumer purchases of goods and services increased at a robust 4% inflation-adjusted annual clip in the past two quarters. But economists and retail executives now see signs that the anticipated slowdown is at hand. Gasoline prices are pinching, the housing slump continues and the labor market, which has provided significant support, is showing signs of fatigue.

The Journal authors seem to be anticipating that, when the week is done, the emerging picture on retail trade will not be a pretty one:

Amid concern about consumers' habits, big retailers issue April sales reports tomorrow, and the Commerce Department follows on Friday with its estimate of retail sales in April. Yesterday, Redbook research said its index of chain-store sales in April fell 4.1% from March. The International Council of Shopping Centers said its measure of chain-store sales last week was running only 1.7% higher than a year ago, the weakest ICSC reading since early March, when the index matched a nearly four-year low...

Sears Holdings Corp. last week said it would miss earnings estimates for its first quarter ended May 5. Chairman Edward Lampert said, "I'm sort of cautious about the economy." That added to downbeat assessments from Wal-Mart Stores Inc. and Target Corp., which has said same-store sales in April were "much weaker" than initial expectations. Circuit City Stores Inc. has cited weak demand for flat-screen televisions, and Talbots Inc. and Bebe Stores Inc. noted lackluster sales of apparel.

Consumer spending accounts for 70% of all spending, so a slowdown is always significant, but even more so now with business investment sluggish...

A few things to keep in mind. First, retail trade, which does not include services, is only a piece of the consumption pie:




Second, over the past year or so growth in personal consumption expenditures has not been tracking growth in retail sales particularly closely :




I don't argue the article's broad point that there are plenty of reasons to suspect that consumers might retrench.  But it is wise to remember that in the recent past the death of the consumer has been greatly exaggerated more than once.

May 9, 2007 in Data Releases | Permalink


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Has EVERYONE forgotten the consumer & gov't. spending responsible for our last five year's GDP growth was borrowed, not earned?
It is NOT the FED's job to see that we never again suffer the horrors & indignities of living through two successive quarters of negative GDP growth.

Posted by: bailey | May 09, 2007 at 09:58 AM

Interesting post and sources Dave ...

Clearly we are moving closer to the day of reckoning in terms of the US consumer. On that note I agree with you that nothing at this point is final.

Let us wait and see.

Posted by: claus vistesen | May 09, 2007 at 04:48 PM

Be careful comparing nominal spending on retail sales and spending on services. A significant factor in the divergence is that the retail sector is experiencing actual deflation.

Posted by: spencer | May 10, 2007 at 12:04 PM

I wonder if spencer thinks that carpenters have been booted off their old job sites of residential construction by 'material movers' and whether that displacement might be construed as "actual deflation".
Similarly, program installers might be making inroads on IT work that requires only small adjustments rather than tailor made software. [Where is cm so that he could substantiate my suspicians...possibly as total crap and conjecture?]

Posted by: calmo | May 11, 2007 at 12:38 AM

yes, no, or maybe! what is it?

Posted by: zorro | May 11, 2007 at 02:02 PM

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