DISCUSSION

Retail Sales Surprise

September 15, 2010Written by George Anderson

The predictions were flying in the lead-up to yesterday's announcement by the Commerce Department of August's retail numbers. Almost all of them pegged the expected growth rate over July at 0.3 percent. At this desk, we received at least two press releases that suggested we needed to interview people because they had knowledge that the numbers would be even lower. The gloom and doom express was going at full speed.

Today, we know the Commerce Department came out with its numbers and, surprise, August sales were up a better-than-expected 0.4 percent compared to July, which had also shown an increase. The August numbers showed the highest increase in five months and were up 3.6 percent over the same period last year.

Richard Berner, co-head of global economics for Morgan Stanley, said too much focus is being put on how little consumers are spending and too little on how they are improving their ability to buy as a result of paying down debt.

"The deleveraging timetable is nearly a year ahead of schedule," he told Bloomberg News.

Robert Doll, vice chairman of BlackRock, told the news service, "I don't think enough credit has been given to that. The U.S. consumer is not dead."

Dominique Strauss-Kahn, managing director of the International Monetary Fund, told CNBC that the government's stimulus spending had helped avert an economic crisis, echoing other reports in recent weeks.

"I think what the U.S. is doing today is the right thing. I think as long as they will support (the recovery), finally it will pick up and create jobs," Mr. Strauss-Kahn said.

On the subject of jobs, a report last month by the outplacement firm Challenger, Gray & Christmas, said that while unemployment is high, the pace of recovery is comparatively strong based on historical terms.

"By most accounts, we are barely a year into the recovery. At this point in the previous two recoveries -- following the 1991 and 2001 recessions -- the job market was actually getting worse. Many people are so caught up looking at the weekly and monthly numbers, that they fail to look at the bigger trends, which indicate just how much the job market has improved over the last 12 months," said John Challenger, chief executive officer of Challenger, Gray & Christmas, in a statement.

"I'm not claiming the U.S. consumer has all its problems solved, but it's heading in the right direction," Mr. Doll told Bloomberg. "Talk of the U.S. consumer being in dire straits was too negative."

Discussion Question: Has all the glass half-empty talk on the part of politicians, analysts and others in the media distorted the true nature of the economic challenges facing the U.S. and, perhaps, even slowed the recovery?

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