The Census Bureau reported that retail sales grew by 0.1 percent in December, their slowest pace since May. This suggests that holiday sales – despite strong Black Friday and Christmas week sales – were weaker than many might have preferred. In fact, if you were to exclude auto sales, retail sales would have fallen 0.2 percent. Nonetheless, retail sales in 2011 were 7.7 percent higher than in 2010.

Areas of strong growth in December included building materials (up 1.6 percent), motor vehicle and parts (up 1.5 percent), furniture and home furnishings (up 1 percent), clothing and accessories (up 0.7 percent) and food service and drinking places (up 0.7 percent). These were offset, though, by declines in electronics and appliances (down 3.9 percent), gasoline stations (down 1.6 percent due to lower petroleum prices) and general merchandisers (down 0.8 percent).

These numbers suggest that Americans continue to be cautious in their spending despite rising confidence and improving labor market conditions. Still, it also shows the public willing to open up its pocketbook selectively on big-ticket items such as automobiles and home improvement. Non-store retailers (up 10.6 percent) experienced the fastest year-over-year growth in retail sales; this was followed by auto dealers (up 9.5 percent), with clothing, building materials and furnishings doing well, too.

Meanwhile, the Census Bureau also released business inventory data for November, with manufacturers experiencing a 0.5 percent increase in inventories for the month. This represents a slower pace than the 0.9 percent growth rate of October. Manufacturers’ sales were unchanged in November, with the inventory-to-sales ratio edging slightly higher to 1.34 from 1.33. Overall, though, businesses have done an excellent job of inventory control of late.

For the larger economy, both sales and inventories were up 0.3 percent in November. The motor vehicle sector had the largest increase in inventories, up 0.6 percent.

Chad Moutray is chief economist, National Association of Manufacturers.

The Census Bureau stated that retail sales fell 0.2 percent in May, its first decline since June 2010. The largest decliner was motor vehicle and parts sales, which dropped 2.9 percent from the previous month. Excluding autos, retail sales rose 0.3 percent. Even with these declines, however, it is important to note that retail sales were up 7.7 percent since May 2010, with auto sales up 5.4 percent over the past year.

Consumers continue to be pinched by rising prices. (Note that the consumer price index data for May will be released tomorrow.)  As a result, the weakness in spending went beyond automobiles. Other sectors with declining sales in May were electronics and appliances (down 1.3 percent), furniture and home furnishings (down 0.7 percent), food and beverages (down 0.5 percent), sporting goods and hobbies (down 0.4 percent), and general merchandisers (down 0.1 percent).

Bucking this trend, though, was strong growth in sales from nonstore retailers and building supply stores (both up 1.2 percent). Reflecting upward movement in energy prices, gasoline stations experienced a 0.3 percent increase in sales in May and a 22.3 percent rise year-over-year.

A second report released today shows that small businesses remain pessimistic about the economy – definitely not a good sign. The National Federation of Independent Business (NFIB) reported that its Small Business Optimism Index fell from 91.2 in April to 90.9 in May.

This was the third consecutive month of declines, with the index standing at 94.5 in February. Figures under 100 usually indicate weakness in the small business sector, and respondents appear to be hesitant to expand their businesses, hire new workers, and invest in new capital. The top concern remains poor sales, but perhaps reflecting inflationary pressures, 31 percent of respondents indicated the need to raise prices.

Overall, these two economic indicators reinforce the notion that the economy has weakened somewhat in the second quarter of 2011. Rising energy, food, and raw material prices continue to take their toll, but there are also other headwinds, both temporary and otherwise, which are serving as a drag on the economy. The NFIB survey is more pessimistic than other surveys, including ours, and there I remain cautiously optimistic about manufacturing output in the second half of 2011. 

Yet, these numbers are enough to remind us that economic growth remains tenuous, and for the manufacturing sector to continue to grow, we need to have the right economic and policy environment.

Chad Moutray is chief economist, National Association of Manufacturers.

Ben Bernanke, chairman of the Federal Reserve, testified today before the Joint Economic Committee of Congress. In his prepared statement, he talked about the U.S. manufacturing economy:

On balance, the incoming data suggest that growth in private final demand will be sufficient to promote a moderate economic recovery in coming quarters. Consumer spending continued to increase in the first two months of this year and has now risen at an annual rate of about 2-1/2 percent in real terms since the middle of 2009. In particular, after slowing in January and February, sales of new light motor vehicles bounced back in March as manufacturers offered a new round of incentives. Going forward, consumer spending should be aided by a gradual pickup in jobs and earnings, the recovery in household wealth from recent lows, and some improvement in credit availability.

In the business sector, capital spending on equipment and software appears to have increased at a solid pace again in the first quarter. U.S. manufacturing output, which is benefiting from stronger export demand as well as the inventory adjustment I noted earlier, rose at an annual rate of 8 percent during the eight months ending in February. Also, as I will discuss further in a moment, financial conditions continue to strengthen, thus reducing an important headwind for the economy.

To be sure, significant restraints on the pace of the recovery remain, including weakness in both residential and nonresidential construction and the poor fiscal condition of many state and local governments. (continue reading…)

Today’s Organization for Economic Cooperation and Development’s Composite Leading Indicators signal demand abroad is on a path of improvement for 2010, but the American economy is not keeping up. Broad based growth sent the OECD higher in October for the eighth consecutive month, and above its long-term average of 100 to 101.4 in October from 100.4 in September. The October rise was driven by solid gains in Europe as well as milder increases in Asian economies. Economic conditions in the United States also are improving but at a slower pace than most of the other OECD nations. Stronger growth abroad along with a more competitive value of the dollar will continue to propel the recovery in U.S. exports that began in May.

Separately, the Commerce Department reported today that retail sales rose by 1.3 percent in November,  slight acceleration from the increase in October. However, 42 percent of last month’s rise was due to increased sales at gasoline stations, which were mainly driven by higher gasoline prices. Outside of purchases at gasoline stations, retail sales rose by only 0.8 percent in November, which was a deceleration from October.

Today’s reports show that while economic momentum is building abroad, the U.S. economy is not keeping pace. The American consumer is reluctant to spend, at least in part because of fears about job security.

While job creation remains a focal point in Washington these days, one of the most effective ways we can do that is to increase exports by approving pending free trade agreements. We know that 95 percent of the world’s consumers are overseas and they have money to spend. In both the near term and long term, an aggressive export campaign is going to be key to job creation.

From Die Welt newspaper, a German national daily newspaper published in Hamburg, reporting on a Sunday shopping day in the city’s retail district, “Hamburg City.” Germany still has blue laws restricting Sunday and evening store hours, although the laws have been relaxed over the last decade.

“500,000 Shoppers Storm the Stores on Sunday”

The “Open Sundays” day of shopping in Hamburg has overwhelmingly exceeded retailers’ expectations. Most stores opened right at 1 p.m. for an exciting day of shopping in fall-like temperatures. Even beauty parlors offered their services. “We had about 500,000 customers pouring into the city all the way until the 6 p.m. closing,” City Manager Briggite Engler rejoiced, saying the numbers confirmed her prediction. “We are very satisfied,” she said, “because the sales volume was 20 percent higher than the last “Open Sunday,” which took place on April 1.

And…

According to retailers’ accounts, the items that drew the most attention from shoppers were the fall and winter collections, high-value espresso machines and electronics.