February 15, 2006
IT'S JOE'S PARTY, AND HE'LL SPEND IF HE WANTS TO
Joe Sixpack is at once confounding the experts and inserting himself into every debate among economists, politicians, investors and anyone else who has a dog in the race otherwise known as the American economy.
Indeed, yesterday's blowout retail sales report revealed a sizzling 2.3% rise in January over December's admittedly weak report. Even more impressive is the 8.8% rise for last month over the year-earlier number. That's head and shoulders over general economic growth and the overall pace of inflation. Rumors of Joe's death as a spending entity, in sum, continue to look greatly exaggerated.
To be sure, by a number of metrics, Joe's spending looks set to get the better of him and his associates across the nation. Consumer debt is mounting in relative and absolute terms, in some cases to record levels, triggering anxiety attacks for some pundits. But no matter what you expect comes next in consumer spending, it's a topical subject, and arguably the only subject at the Fed, on Wall Street, and Main Street. All eyes, in other words, are keenly focused on Joe in an attempt to divine his next move when it comes to pulling out his credit card.
With that in mind, now seems a good time to take a closer look at the January retail sales report, if only to amuse ourselves as we await the next injection of data and news. As such, we present the following chart, which shows the major categories tracked in the government's retail sales survey. It's ranked by one-month percentage change, with the 12-month change for each category tacked on for added perspective.
What pops out at us first is the fact that the biggest increase by far, whether by one or 12 months, comes in visits to the local gasoline station, which in a nod to the past we like to call "fillin' stations." No surprise here, since energy prices generally have taken wing in recent years, forcing Joe to elevate his spending when filling up the SUV. If higher expenditures on energy lead to reduced spending elsewhere, the trend isn't evident. That doesn't mean energy won't take a bigger bite out of the consuming habit, but so far there's not a lot of empirical support for that notion, at least in the retail sales numbers.
How has Joe been able to stop the energy bull market from crashing his spending party? By the great American tradition of borrowing, which some party poopers like to call debt.
For the moment, Joe has been able to have his cake and eat it too, offering the American economy no less. The question is, how long can Joe keep the party going?
Posted by jp at February 15, 2006 9:49 AM
Exxon should be happy.
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Posted by: Jose at February 17, 2006 9:48 AM