The Recession Ain't Over Until It's Over

A growing number of economists apparently believe the recession is over. According to the Wall Street Journal, 27 of 47 economists surveyed say the recession, which began in December 2007, has already ended. Another 11 economists say the recession will end by September.

Well, Thursday's retail sales figures threw some cold water on that idea. At the very least, if the recession has ended, the retail sales numbers suggest a double-dip is in the works.

The consensus expectation was for a 0.8% rise in retail sales in July. Turns out, however, that sales fell 0.1%. They fell 0.6% if you take out autos sales, which got an artificial boost from the "cash for clunkers" program. That program is merely bringing future sales forward. It is not going to create a long-lasting increase in auto sales.

Of course, some retailers are doing better than others. Wal-Mart (WMT), where it seems most of America now shops, is doing better than others. Yet even Wal-Mart is struggling with second-quarter U.S. sales falling 1.2%.

High-end retailers that are trying to hold the line on pricing are really getting hammered. For example, Abercrombie & Fitch (ANF) reported a 30% drop in same-store sales for the second quarter. Some of its competitors are doing better, but only because they are willing to discount their merchandise.

U.S. GDP is heavily dependent on consumer spending. Just as stock prices are often pressured by investor sentiment, consumer spending is strongly influenced by psychology. Some economists and government officials seem to think that consumers will believe the recession is over if we just tell them its over. Then they will start spending again and the recession really will be over. In other words, we will have a self-fulfilling prophecy.

However, at this point, declaring the recession over is simply premature.

Comments

[Dave Wrixon:]

The consumer's problem is that a lot of decisions are effectively taken for them. They save because their credit lines are cut or because their jobs are under threat, not simply because they feel less jolly, although to listen to the talking heads you might think that is how it works.

Aug 16 05:03 AM

[Old Trader:]

Can I get some "sprinkles" on my double dip, at least?

Aug 16 09:52 AM

[Adoptsalot:]

I don't get it. Who are these economists that think the recession is over ? How can 'the recession' be over? It's a math thing.

12% of homeowners are still reported to be either behind on their mortgage or it in the foreclosure process .
10% of the population is unemployed (most experts believe this number is under reported due to the number of people who have exhausted their unemployment benefits , never signed up for unemployment benefits, or were not entitled to unemployment benefits ) with no -new -real -jobs on the horizon.
Those that are employed are realizing that they need substantial savings in order to survive a layoff themselves , possibly as much as 18 to 24 months.
Boomers who saw their savings errode or get wiped out completely, now have to save as though their retirement depends on it , oh wait... it does .
Massive personal debt has caught up with over 23% of the population , with many of them looking at bankruptcy in some form, as a means of escape . In some areas, personal bankruptcies are up over 300%.
There are cirites and states that have so poorly managed their finances they are facing bancruptcy. And those that are having a bad time now, are not going to know what to do with themselves when April 15 comes around next year and even less money rolls into their coffers .
Increased taxes are on the horizon everywhere, and between city , county , state & Federal , could easily hit an adddtional 10%.
Banks continue to be closed at an alarming rate.
And the Fed is propping up its pet projects and contributors , I mean businesses, by throwing billions of dollars at them . (Any new jobs coming out of the clunkers program ? I don't think so ! )

Aug 16 02:04 PM