The consumers’ capacity for spending come hell or high water is widely recognized and celebrated. But yesterday’s retail sales report for October offers another excuse to pause and reconsider if more of the same is in store for 2007.
As the chart below illustrates, there’s reason to wonder if Joe Sixpack’s finally met his match and is now in the process of turning a new leaf that deemphasizes spending. For the second month running, retail sales slipped. Considering that August sales were flat, you have to go back to July to find a month when consumption overall advanced over the previous month.

And, no, stripping out the volatile motor vehicle sales doesn’t alter the downward bias in retail sales.
Similarly, a closer look at October’s retail sales doesn’t offer much improvement over the big picture. Yes, on a 12-month basis, growth is still evident. But what have you done for us lately? At best, the answer is mixed as the red ink in the one-month column below reveals.

If consumer spending continues to slow, the stakes will rise in the forecast by some that the worst of the real estate correction is behind us. If that proves to be a premature notion, Joe will have to step up to the plate once more to keep the economy afloat. With the holiday-spending season upon us, there’s a chance that a fresh surge of consumption may be coming. Even so, with real estate and consumption moderating, the economy can’t afford much else to go wrong now.