Wednesday, June 13, 2012

June is Becoming the Cruelest Month – Economic Weakness in Declines in Retail Sales and Consumer Spending Portends Economic Weakness

What Does Mr. Romney Have to Do to Defeat Mr. Obama – Nothing – Really Nothing

In 2010 the economy started strong and then faded.  In 2011 the economy started strong and then faded.  In 2012 the economy started strong and then __________________ (you fill in the blank).

Consumer spending (not lower taxes, sorry Conservatives) is what drives the economy.  When consumer spending, the single largest component of the economy (it’s not government, sorry Conservatives) fails to increase the economy suffers, sometimes greatly.  With the release of May retail sales and the downward revision of April retail sales the signal being sent is loud and clear and somewhat obnoxious.  The economy is slowing.

Retail and food service sales decreased 0.2% last month to a seasonally adjusted $404.60 billion, the Commerce Department reported Wednesday. Sales were up 5.3% year over year.

Economists surveyed by Dow Jones Newswires had forecast a 0.3% decline.

Retail sales in April fell a downwardly revised 0.2%, compared with a previously reported 0.1% gain.

That marks the first time in nearly two years that retail sales have fallen in consecutive months.

Auto sales continued to be good, but as noted here earlier, this is largely a technical correction as consumers and fleet owners delayed purchasing new cars for several years and now find themselves in the position of having to buy a new car for mechanical or safety reasons.  Take out autos from the sales change and results are even worse.

Americans bought 1,334,600 new vehicles last month, researcher Autodata Corp. reported earlier this month.

But activity elsewhere were mixed. Excluding autos, retail sales fell 0.4% in May, after sliding 0.3% the previous month. May's decline was the biggest in two years.

The politics of all of this is also straight forward.  Mr. Romney’s main job is to say nothing specific and do nothing that would cause anyone to look closely at his proposals, if indeed that is possible.  All he has to do is sit and wait for November.

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