Retail sales rose in April—the seventh consecutive monthly increase, the government reported. Meanwhile, industrial production also rose last month—the third straight rise and the strongest since January. On a year-over-year basis, both measures are up sharply, suggesting that the broad trend in the economic recovery rolls on.
Looking futher out, there’s still debate about the sustainability of recent economic growth, engineered to some extent by fiscal and monetary stimulus over the past year. In particular, some analysts wonder if current growth is merely borrowing expansion from the future. If so, the second half of the year may suffer as payback kicks in. But no one really knows. The next several months may prove to be a crucial period for deciding what lies ahead. In essence, the snapback period of growth after the recession will be stress tested for durability through the coming weeks and months. One burden that awaits is the “herculean task in digesting mounting piles of debt in the U.S. and around the world while keep growing bubbling and inflation contained. As economic juggling acts go, this one promises to be more than a little challenging. Perhaps that’s one reason why the stock market swooned this morning despite the rise in retail sales and industrial production.
Meantime, here’s a sampling of the commentary from this morning’s chattering classes on the numbers du jour…
“Production is barely keeping pace with demand,” Aaron Smith, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania, said before the report. Lean inventories relative to sales “supports the outlook for solid manufacturing growth.” Bloomberg BusinessWeek
“We’re starting the second quarter on a very positive note. The manufacturing recovery is getting more diffuse with 17 of 19 major sectors increasing production,” said David Huether, chief economist at the National Association of Manufacturers. “It looks more durable and deeper.” Associated Press
“The industrial sector is benefiting from increased domestic demand, a strong export expansion, and to an important extent from a cyclical inventory swing,” said Dan Meckstroth, chief economist for the Manufacturers Alliance. MarketWatch.com
Official US figures showed a 0.4% rise in retail sales last month, compared to expectations of a 0.2% increase. At the same time the March figure has been revised upwards from 1.9% to 2.1%. James Knightley at ING Bank said:
The April US retail sales report is a little better than the market was expecting with headline sales up 0.4% month on month. The details offer a very mixed picture with a 6.9% jump in building/garden equipment offsetting falls in furniture, clothing and sporting goods. Indeed, if we exclude the building group, sales would have fallen 0.3% month on month. Consequently the detail shows retail sales growth isn’t as healthy as the headline suggests. Moreover, consumer spending continues to grow more strongly than the relationship with consumer confidence suggests would historically be the case. We therefore do have doubts about the sustainability of the strength in retail sales and would not be surprised to see softer figures in the next few months.