"Consumers are just throwing in the towel," according to Global Insight economist Brian Bethune. I like a nice quote, but Bethune displays utter ignorance in his search for news exposure. Let's take a look at yesterday's retail sales report:
The drop in retail sales amounted to one tenth of one percent. Yes it's a drop. And yes, retail sales normally rise by a good bit from one month to the next. But "throwing in the towel"? No way.
Consumers paid a lot more for each gallon of gas, and they avoided buying new cars. Excluding autos, retail sales were UP four tenths of a percent.
On an inflation-adjusted basis, retail spending was down more than a little bit. But it's hard for me to call $385 billion of spending "throwing in the towel."
My economic forecast? I'm having trouble getting negative quarters of GDP change when I run the numbers. If I'm right, then consumers will level out at current spending levels. With lower gasoline prices, they'll have more to spend on other stuff. People with stable incomes (which includes most government and service sector employees, plus retirees) will look at great bargains in automobiles and buy a few more cars than normal. The economy will show more strength in 2009, and then we'll start worrying about the Fed tightening too much.
Finally, Wal-Mart earnings are up, while Macy's are down. Goes to show that not everyone suffers when the economy softens. And it's not just down-market versus upscale. Last time I stopped by Macy's, the merchandise looked like Wal-Mart, but the price tags didn't.