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Retail Sales Disappointed Once Again in June

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The U.S. consumer appears to be more cautious than we would expect, with disappointing retail sales figures once again in June, falling for the second straight month, according to the Census Bureau. Spending at retailers were off by 0.2 percent in June, extending the 0.1 percent declines seen in May and below consensus estimates for a slight gain. (On the positive side, the May number was revised higher, as it was originally down by 0.3 percent.) Americans had been more willing to open their pocketbooks, especially relative to the caution seen at the beginning of 2016. This culminated in 5.6 percent year-over-year growth in January, its fastest pace since March 2012, but the year-over-year rate has eased since then. Since June 2016, retail spending has increased by a more modest 2.8 percent. Excluding autos, the year-over-year pace was 2.4 percent. Read More

Consumer Confidence Continues to Rise in November

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The University of Michigan and Thomson Reuters report that consumer confidence rose to 84.9 in November, up from 82.6 in October. This is its highest point since July 2007 and mirrors similar growth seen in the competing survey from the Conference Board. Americans’ perceptions about both the current and future economic environment was higher, with improvements surrounding present conditions jumping more (up from 88.1 to 91.3).

The forward-looking component increased from 79.0 to 80.8, suggesting that consumers remain cautiously optimistic about the coming months. Overall, these data are consistent with rising retail sales and personal spending numbers. They also imply that consumers are less concerned about the fiscal cliff than either policymakers or business leaders are. This, of course, might change, particularly if the political wrangling for a compromise to avert the cliff becomes contentious (and as the cliff starts to get more attention in the media, as it has this week post-election). For now at least, higher consumer sentiment and durable and nondurable goods spending benefits manufacturers.

Inflationary expectations have eased somewhat over the past few months. In August, consumers expected prices to rise 3.6 percent over the next 12 months; that has fallen to 3.0 percent in November. This suggests modest inflationary pressures, with lower energy costs pushing anticipated prices lower for three straight months.

Chad Moutray is the chief economist at the National Association of Manufacturers.

Consumers Decrease Spending in May

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The Bureau of Economic Analysis reported that consumer spending slightly in May, its first decrease since November. Looking specifically at manufactured goods, durable goods expenditures declined from $3,792.0 billion in April to $3,765.8 billion in May. Likewise, nondurable goods spending fell from $1,222.5 billion to $1,217.9 billion. It was the third consecutive monthly decline for both. Overall personal consumption remains 3.5 percent higher than it was on May 2011, however.

Meanwhile, personal income increased by 0.2 percent, which is the same rate as observed in April. Manufacturing wages and salaries fell, though, declining from $717.5 billion to $713.0 billion. This is essentially the level observed in January, so the gains since then were wiped out. Given recent weaknesses in the manufacturing sector, though, it is not surprising.

Consumers have benefited from lower energy costs. The price index related to personal consumption expenditures declined 0.2 percent in May, with year-over-year gains down to 1.5 percent. Just six months ago, the year-over-year increase was 2.7 percent. Since then, petroleum costs soared and then declined significantly.

Breaking the price index down by sector, durable goods prices have declined by 1.2 percent, nondurables rose by 1.3 percent, and services increased by 2 percent over the past year. Energy costs are now 3.8 percent below where they stood last year.

Chad Moutray is chief economist, National Association of Manufacturers.

Consumers Pull Back Spending Somewhat in May

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For the second month in a row, consumers have reduced their retail spending. The Census Bureau reported that May retail sales fell 0.2 percent, following a similar fall in April. There were some exceptions. Motor vehicle sales, for instance, rose 0.8 percent, which is a significant improvement after some weaknesses in March and April. Excluding autos, retail sales would have fallen by 0.4 percent. Other sectors with stronger sales included nonstore retailers (up 1.3 percent), clothing and accessories (up 0.9 percent), electronics and appliances (up 0.8 percent) and furniture and home furnishings (up 0.4 percent).

Reduced petroleum prices helped to reduce the sales value at gasoline stations, which was down 2.2 percent. This follows a 1.4 percent decline in gasoline station sales in April, but it also represents the other side of rising sales (and prices) experienced in January, February, and March. If autos and gasoline sales were excluded, retail sales would have fallen by 0.1 percent.

Other decliners included building materials (down 1.7 percent), general merchandisers (down 0.5 percent), food and beverages (down 0.2 percent) and restaurants (down 0.2 percent).

Overall, these numbers suggest that Americans are pulling back on the spending somewhat, even when you adjust for lower gasoline prices. There are some exceptions to this, such as motor vehicles, but it is clear that consumer anxieties are having an impact, at least in the short term. With that said, the longer-term trend remains positive, with retail sales up 5.7 percent year-over-year. Consumers have also been the main driver for real GDP growth, as seen in its most recent revision.

Chad Moutray is chief economist, National Association of Manufacturers.