Retail Sales and the Economy

by Laura Ehrenberg-Chesler on February 20, 2019

in Economic Indicators,Employment,Energy,inflation/deflation,retail sales

December retail sales were disappointing. Investors are concerned that this may presage a slowing economy in the near future. But after those sales numbers were reported, some additional data was released that may contradict the growing concern about a near term slowdown.

Goldman Sachs recently reported that “several of the fundamental drivers of consumer spending, including solid real disposable income growth, strong household balance sheets, and a relatively elevated saving rate, still send a fairly positive message. The aggregate weekly payrolls index—the product of employment, average weekly hours, and average hourly earnings—has grown at a 5.4% annualized rate over the past three months while cheaper oil has lowered year-over-year headline CPI inflation to 1.6%. Also of note, we estimate that the December personal saving rate has likely risen to 7%, while a simple model based on fundamentals suggests an “equilibrium” saving rate below 5%. This gap also implies scope for solid spending growth in 2019.”

Based on the aforementioned data, it seems as though it may be a little too soon to write off a continuation of the economic growth we have enjoyed for the past two years.

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