Retail Woes

Retail sales for May were down, adding to the evidence that this long under-performing recovery is still failing to pick up any steam.

According to numbers released by the U.S. Census Bureau on June 13, retail and food service sales, on a seasonally adjusted basis, decreased by 0.2 percent in May.

That actually was the second straight month of decline (April also dropped by 0.2 percent), coming after 21 months of consecutive increases.

Retail sales for autos fell as well, by an even larger amount – by -0.4 percent – which also followed on a decline of 0.3 percent in April.

Retail sales, though not including spending on services, provide an early, broad look at the state of consumer spending. Given these two-month declines, the retail sales data point to continuing, perhaps even increasing, worries among consumers.

It is important to keep in mind that consumers are followers. That is, they tend to follow the state of business, including investment in new and expanding businesses, and whether jobs are being lost or gained, and at what pace. Given the concerns that entrepreneurs, businesses and investors have on the public policy front in terms of higher taxes, unprecedented levels of government spending and debt, and regulation, for example, risk taking, growth and employment are nowhere near healthy recovery levels. In turn, consumers remain worried about their jobs and income levels.

Consumers are not going to lead us back onto a track of robust economic growth. For that to happen, we need substantial, permanent, broad-based tax and regulatory relief, which will incentivize risk taking, and then consumers will be more than happy to join in.

Raymond J. Keating

Chief Economist