Retail Sales Decline: Harbinger of Recession?

The total nominal increase in July 2006 Retail Sales of $368.405 billion was 3.9% from July 2005's $354.414 billion. However, adjusting for inflation using the Bureau of Labor Statistics Consumer Price Index increase of 4.3%, this reduces the "real" Retail Sales change to -0.4%. However, the figures are even worse if gasoline station sales are subtracted. Subtracting July 2006's $43.918 billion in gasoline sales from the total nominal Retail Sales gives $327 billion. Subtracting July 2005's gasoline station sales from the total nominal Retail Sales (from July 2005) gives $319.53 billion. The difference between the July 2006's retail sales (ex. gasoline station) and July 2005's retail sales is only 2.3% in nominal (non-inflation-adjusted) dollars. Adjusting for inflation using the CPI increase of 4.3% puts the total at a -2.0%. In other words, excluding gasoline station sales, inflation-adjusted Retail Sales declined 2.0% from July of 2005.

This can be seen at the link from the Retail Sales chart below copied from the U.S. Bureau of Economic Analysis report on Retail Sales

http://i27.photobucket.com/albums/c1...tlSlsBEA-X.gif

General Merchandise Sales, which make up the biggest component of Retail Sales, showed a nominal increase in dollar sales of 4.3%. (underlined in blue on the chart above.) Again, this is exactly the same as the increase in the Consumer Price Index of 4.3%. Thus, the real change in General Merchandise Sales since July of 2005 is 0.0%. In other words, there has been NO growth in General Merchandise Sales since July of 2005.


The declining inflation-adjusted Retail Sales numbers are an ominous sign for the economy. They're even more concerning when gasoline station sales figures are not included, which leaves the remaining total for Retail Sales at 2% less than the previous July. Even with increased borrowing, consumers spending is declining. Since consumer spending is 70% of GDP growth, it makes further GDP growth difficult, if not impossible. With consumer borrowing ability expected to fall even further, consumer spending will likely decline further as well. Real wages have continued their steady decline since December 2002. Median real family income has declined every year since 1999. With decreasing consumer spending and decreasing consumer demand, labor demand can be expected to decline even further. The declining labor demand will result in further declines in both wages and employment, reducing consumer spending power even further.

Several noteworthy economists are suggesting a recession is on the way. Paul Krugman has discussed this in his most recent article titled Intimations of Recession. Economist Nouriel Roubini, former member of Clinton's Council of Economic Advisors, has put the likelihood of Recession at 70% by the end of 2006. Another article from the Daily Reckoning has also laid out a strong case for an impending recession. All of these sources have provided a considerable amount of evidence to support their predictions. It appears that our "faith-based" economy is running out of steam. It can no longer be kept afloat by the hot air from the Housing Bubble and the alternate reality creation of the NeoCon-Artist spin machine.


unlawflcombatnt

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The economy needs balance between the "means of production" & "means of consumption."

Yeah, and we were just treated to the audited government numbers from the year 2005. Here, read 'em and weep:

http://www.usatoday.com/printedition...03.art_dom.htm

An interesting article by Jessica Bennett from MSNBC, in an interview with economist Christian E. Weller, states that household debt is now 126% of Disposable Personal Income. Consumer debt, not including home mortgages, is now $2.17 Trillion dollars. In 2005, consumers cashed out $431 billion in home equity. To put this in perspective, U.S. GDP was $12.4 trillion in 2005. According to the U.S. Bureau of Economic Analysis, GDP growth for 2005 was 3.2%, or about $397 billion. The growth in Personal Outlays was $563 billion. Disposable Personal Income increased by only $355 billion. Thus American consumers spent $208 billion more than they earned in 2005. Much of this additional $208 billion was financed through home equity extraction. Below is a link to a graphic version taken from the U.S. Bureau of Economic Analysis GDP report. Note the change between the 2004 and 2005 Disposable Personal Incomes, and the change between 2004 and 2005 Personal Outlays (underlined in red.)

http://i27.photobucket.com/albums/c1...PersIncBEA.gif

The direct link to the BEA site for this information is at: http://www.bea.gov/bea/newsrelarchive/2006/gdp206a.pdf

As stated elsewhere, this debt bubble is a ticking time bomb. Eventually consumers will be unable to borrow enough money to increase consumer spending, to make up for declining real wages. There is considerable evidence that this point has already been reached. Durable purchases by consumers have increased 0% since January, following less than a 2% increase in 2005. Many consider this the opening salvo of an upcoming recession. Time will tell.

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Ooops. Looks like you're behind a bit:

Retail sales rebound

Government report says overall sales up 1.4 % in July, a recovery from June drop; ex-auto sales increased 1%.

By Parija B. Kavilanz, CNNMoney.com staff writer
August 11 2006: 9:36 AM EDT


NEW YORK (CNNMoney.com) -- Retail sales came back strong in July after a weak showing in the previous month, a government report showed Friday.

The Commerce Department reported that overall retail sales last month jumped 1.4 percent, compared to a revised 0.4 percent dip in June.

It was the strongest gain since January, when retail sales surged 3 percent.

http://money.cnn.com/2006/08/11/news...ales/index.htm

AND....

Mortgage applications bounce back

Mortgage Bankers Association reports that applications rose nearly 5 percent last week coming off four-year lows.
August 9 2006: 7:00 AM EDT


NEW YORK (CNNMoney.com) -- U.S. mortgage applications rebounded last week from 4-year lows as mortgage rates slipped across the board, an industry trade group said Wednesday.

AND....

Federal Deficit Improves Dramatically, U.S. Treasury Reports
Thursday, August 10, 2006


WASHINGTON — The federal deficit through July is running well below last year's pace, helped by strong growth in revenues, the Treasury Department reported Thursday. T

Through the first 10 months of this budget year, the deficit totaled $239.7 billion, an improvement of 20.8 percent from the same period a year ago, when it was $302.8 billion.

The deficit in July totaled $33.2 billion, down sharply from an imbalance of $53.4 billion in July 2005.

The narrowing of the deficit this year reflects a surge in government revenues from higher corporate and individual tax receipts.

The administration is now forecasting that the deficit for the 2006 budget year, which ends on Sept. 30, will total $296 billion, a marked improvement from the $423 billion deficit the administration was forecasting back in February."

http://www.foxnews.com/story/0,2933,207824,00.html

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"What exactly is this foreign policy experience?" Obama said mockingly of the New York senator. "Was she negotiating treaties? Was she handling crises? The answer is no."

and people who mortgaged up to the hilt (foolishly) on variable rate loans will feel the pain.

But the fundamentals still look good, in spite of oil. While still bad, the deficit and federal debt are improving. Stocks are volatile day to day, but the ratios are good and don't suggest a bear market for awhile.

Perhaps most important as a gauge of confidence, airline bookings have remained steady even after the events of the past week.

No, it's you who is behind. Despite the 1-month increase, inflation-adjusted sales are down from July 2005. That's exactly what is shown in the graphic and that graphic comes from the NeoCon-Artist controlled government. More specifically it comes from the U.S. Census Bureau.

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Technically, a recession is always on the way! It's just a matter of when.

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I wasn't born with enough middle fingers.

Dems are simply "hoping" it happens. There's a reason you don't see the Democrat leaders talking about the economy, though. Because it's GOOD. And they know it. Even the deficit has improving numbers.

Dems want it so badly.....because they know they can't win on the national security issue. They are always hoping for bad news that might help them out.

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"What exactly is this foreign policy experience?" Obama said mockingly of the New York senator. "Was she negotiating treaties? Was she handling crises? The answer is no."

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I've been informed....don't blame Bush, he's "not in control"
That must make him out of control

I read your referenced "CNNMONEY" article, you cherry picked your info. There's more:

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I've been informed....don't blame Bush, he's "not in control"
That must make him out of control