The only thing worse than a financial crisis is a financial crisis that hits when the economy’s in or near recession. Fortunately, the economy’s still growing, and for the moment there’s no reason to think the expansion is in imminent danger of evaporating.
The latest evidence comes in this morning’s July report of retail sales, which rose 0.3% last month, reversing June’s nasty 0.7% tumble, the U.S. Census Bureau reported today. For the year through July, retail sales climbed 3.2%.
On its face, the numbers suggest, albeit modestly, that the growth machine remains intact. But the worries start to set in when you consider the historical context, which we’ve laid out for retail sales in the following chart.
It’s clear that when retail sales are viewed through the prism of recent history, there’s reason to wonder if Joe Sixpack can continue to spend at yesterday’s levels tomorrow. Graphically, the rate of retail sales growth is slowing–on that there’s no debate, as the linear progression trend (the blue line) indicates. Adding to the potency of the trend is the fact that the latest reading is well the trend line, not to mention near the absolute low of late set back in January and about half as much as the latest reading for the nominal rate of annualized GDP growth. All of which raises a few questions: Are retail sales unusually low for the current economic climate? Or is the pace of economic expansion too high given the trend in retail sales?