Tags: Jakab | retail | sales | households

WSJ's Jakab: Retail Sales Figures Aren't as Important as All That

By    |   Tuesday, 14 May 2013 10:25 AM

The financial media like to make a big deal out of retail sales figures, because consumption supposedly accounts for about 70 percent of the economy.

In April, for example, retail sales unexpectedly rose 0.1 percent after a 0.5 percent drop in March, leading some analysts to take a brighter view of the economy.

But there's less to retail spending than meets the eye, says Wall Street Journal columnist Spencer Jakab.

Editor's Note: Startling Proof of the End of America’s Middle Class. Details in the Video

On average, U.S. households dished out $3,645 for retail purchases in March, he writes. "That makes up less than half the personal consumption expenditure that accounts for over two-thirds of gross domestic product [GDP]. The rest includes items such as services and medical care."

So retail sales only account for about 35 percent of GDP.

"What's more, households don't do a very good job of warning economists that the economy is stalling," Jakab says. Just before the Great Recession began in late 2007, retail sales were still rising 4 to 5 percent year over year.

The sales increase didn't slide below 2 percent until March 2008 and didn't turn negative until September of that year, when the financial meltdown began in earnest.

"Shoppers are a bit like Wile E. Coyote, the cartoon character who would levitate briefly before realizing that the ground had gone out from under him," he writes. "That ground — made up of things like private investment, government spending and net exports — looks soft but not recessionary at the moment."

Still, economists were encouraged by April's increase in sales.

"It's more indication that our economy is growing," Tom Hall, an economics professor at Miami University in Ohio, tells Reuters. "It's not growing as rapidly as a lot of people would like, but things are improving."

Editor's Note:
Startling Proof of the End of America’s Middle Class. Details in the Video

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The financial media like to make a big deal out of retail sales figures, because consumption supposedly accounts for about 70 percent of the economy.
Jakab,retail,sales,households
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2013-25-14
Tuesday, 14 May 2013 10:25 AM
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