Tuesday, July 7, 2015

Consumers may lead the way

Economics in a nutshell: The winter slumber is over and with confidence rising, the consumer could lead the way, if only wage gains improve.

Consumers may lead the way

0 comments
Can consumers hold up their part of the economy with incomes going nowhere? (AP Photo/David Duprey)
Can consumers hold up their part of the economy with incomes going nowhere? (AP Photo/David Duprey)
Travel Deals

INDICATOR: March Retail Sales

KEY DATA: Sales: +1.1%; Excluding Vehicles: +0.7%

IN A NUTSHELL: "The winter slumber is over and with confidence rising, the consumer could lead the way, if only wage gains improve."

WHAT IT MEANS: The harsh winter had an impact but the first buds of spring seem to be convincing people that it is time to hit the stores again. Retail sales, which had cratered in January, picked up steam in February and soared in March. The gain was the largest in eighteen months. Part of that came from the surge in vehicle sales as people didn't have to brave the cold or snow to visit the showrooms. But it was not just automotive dealerships that did well. The gains were pretty much across the board, with apparel, furniture, building supplies and Internet companies showing big gains. Families also ate out a lot as they shopped for bargains. The only declines were in gasoline, which was probably driven by some price declines and of more concern, appliances and electronics. People may be buying vehicles again but that seems to be just about the only place where they are putting their money when it comes to big-ticket items.

MARKETS AND FED POLICY IMPLICATIONS: The consumer is on the move and the warmer weather is improving attitudes and sales. The terribly weak January demand will probably limit first quarter consumption but it is not going to be nearly as bad as was feared when the data for the first month of the year were released. That holds out hope that GDP growth might not be that much lower than the 2.6% rise posted in the fourth quarter of 2013. After January, there were estimates below 1%. I think somewhere in the 2% to 2.5% range is possible and with the horrible winter having wreaked havoc on businesses, that would be quite respectable. Investors should like this report as it provides some basis for assuming earnings will improve as we go through the year. With the Fed bailing out of the equity bailout business, it is up to fundamentals to drive equity prices. As for the Fed, a report like this only adds to the conviction that tapering will continue unabated and may allow for a sooner than expected ending of asset purchases. I have September in my forecast.

Joel L. Naroff is the co-author, with veteran journalist Ron Scherer, of "Big Picture Economics: How to Navigate the New Global Economy". Release date is April 21, 2014.

0 comments
We encourage respectful comments but reserve the right to delete anything that doesn't contribute to an engaging dialogue.
Help us moderate this thread by flagging comments that violate our guidelines.

Comment policy:

Philly.com comments are intended to be civil, friendly conversations. Please treat other participants with respect and in a way that you would want to be treated. You are responsible for what you say. And please, stay on topic. If you see an objectionable post, please report it to us using the "Report Abuse" option.

Please note that comments are monitored by Philly.com staff. We reserve the right at all times to remove any information or materials that are unlawful, threatening, abusive, libelous, defamatory, obscene, vulgar, pornographic, profane, indecent or otherwise objectionable. Personal attacks, especially on other participants, are not permitted. We reserve the right to permanently block any user who violates these terms and conditions.

Additionally comments that are long, have multiple paragraph breaks, include code, or include hyperlinks may not be posted.

Read 0 comments
 
comments powered by Disqus
About this blog
Joel L. Naroff is the president and founder of Naroff Economic Advisors, a strategic economic consulting firm in Bucks County. He advises companies across the country on the risks and opportunities that economic developments may have on the organization’s operating environment. An accomplished public speaker, Joel’s humor and unique ability to make economics understandable have brought him a wide following. Reach Joel L. at joel@naroffeconomics.com .

Joel L. Naroff
Also on Philly.com:
letter icon Newsletter