Anyone who waited to buy school supplies on a snaking checkout line at Staples last month may not be surprised that on Friday the Commerce Department reported a 0.6 percent increase in retail sales for August.þþThat growth, adding a pebble to the optimists’ side of the balance scale, nonetheless does little to change the widespread sense among economists that the nation’s economic recovery remains on a relatively modest, sometimes halting, track.þþ“The issue is not a question of whether we’re growing or shrinking, but whether we’re growing or accelerating,” said Steven Blitz, chief economist at ITG Research. “This data says we’re growing, but without accelerating.”þþ“You do not have this grand expansion in discretionary income,” he continued. “The consumer has a limited budget to spend.” So home improvement purchases one month might be replaced by spending on clothes the next.þþMichael Gapen, Barclays’ chief United States economist, agreed that the latest data on sales shows “consumer spending will be modest,” adding “it doesn’t look like it’s downshifting, but it doesn’t look like it’s upshifting either.”þþRetail sales — which rose to a seasonably adjusted $444.4 billion for the month -- are a prime economic engine, accounting for about 45 percent of total consumption. This month’s figures are drawing particular attention in anticipation of next week’s meeting of the Federal Open Market Committee, the Federal Reserve’s policy-making group.þþThe stepped up pace of purchases of autos and trucks helped lift retail sales the most, but there were increases in nearly every category, from electronics and building supplies to groceries and clothing. Not counting the increase in auto sales, spending rose by 0.3 percent. Back-to-school sales tax holidays in 16 states may have helped nudge consumers into stores. The falloff in gasoline sales, economists said, was expected, given the dip in gas prices.þþNews that the government revised July’s retail sales from an initial estimate of zero to 0.3 percent was welcomed by some economists even more than August’s 0.6 percent rise. The initial July report spurred worries that “the consumer-led growth we were taking for granted might be drying up,” said Douglas Handler, chief economist at IHS, a Boston-based global information company.ÿThe revision really dispels that a bit.”þþWhile the economy is in its fifth year of recovery from the low point reached in the middle of 2009, many Americans are still struggling with low wages, reduced hours, and difficulty in finding decent jobs. At the Federal Open Market Committee meeting in June, Janet L. Yellen, chairwoman of the Federal Reserve, expressed confidence in the “underlying strength in the economy,” but noted that a lack of wage growth would cause her to “worry about downside risk to consumer spending.”þþAugust’s job growth was disappointing with employers adding only 142,000 workers. More troubling was the continuing drop in the proportion of working-age adults in the labor force, which reached a 30-year low last month. Some economists fear that people who lost their jobs during the bleakest years of the downturn have dropped out of the workforce altogether.þþOn Thursday, the Labor Department reported the unemployment claims rose by 11,000 for the first week in September to a seasonably adjusted high of 315,000, the highest level since June.þþCountering those disappointments have been increased business investments and improved trade figures that recently prompted the government to revise its estimate of overall growth to an annual rate of 4.2 percent for the second quarter, a turnaround from the 2.1 percent decline in the first quarter.þþMany economists expect growth to slow to a more modest pace during the third quarter, which will end this month. Mr. Gapen said Barclays expects the advance in gross domestic product to run at a 2.5 pace for the summer quarter.
Source: NY Times
