Today's update on retail sales for April wasn't bad, but it wasn't good either. We suspect that more of the same is coming, in retail sales and other economic numbers. The worst of the recession appears to be passing, but the best of the rebound is still nowhere in sight.
Retail sales slipped a mere 0.4% last month on a seasonally adjusted basis, the Census Bureau reports. As declines in this series go, that's the mildest downturn yet since the recession began in December 2007. That's all well and good, but let's not forget that the outright monthly gains in retail sales of January and February have faded. Are we now settling into a period of treading water? Perhaps.
To be sure, there were some bright spots in today's report, including gains in retail sales in the auto and building materials sectors. But overall, the message in today's update is that momentum in retail sales is conspicuously absent. Changing the dynamic will take a sharp turnaround in the labor market. That glorious day, however, is nowhere in sight.
Retail sales are but one indicator, of course. The problem is that broader measures of economic activity aren't yet telling us that growth is near. The majority of the 17 economic indicators we track for The Beta Investment Report are still falling, as the chart below shows.
Since our official call back in March 2008 that the recession had arrived, the chart above has given us little reason to expect that a return of economic expansion is imminent. Our cautious outlook looks all the more relevant as the Fed's huge monetary stimulus of the recent past recedes as a force for stabilizing the economy. It was a bulwark against an even deeper strain of decline, but it was only a temporary stopgap. Eventually, the economy seeks an equilibrium level, even if government intervention slows the process. But as the weeks and months pass, the natural economic forces of supply and demand dominate. Indeed, in the chart above, the sharp bounce from last November to this past February is giving way to the forces of contraction once more.
As Yogi Berra said, It ain't over till it's over. This recession isn't over, even if the worst of the contraction is behind us.