Some analysts say there may be a recession coming, but you wouldn’t know by looking at retail sales. Today’s update on consumer purchases for July shows a surprising resilience in the data. Seasonally adjusted retail sales were up 0.5% last month, the U.S. Census Bureau reports. That’s the second monthly increase. In fact, other than May’s modest retreat, retail sales haven’t had a down month in more than a year.

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The Fed Has Not Done Enough and it Has Not Fired Most of its Ammunition
Uneasy Money | Aug 10
We know that QE2 was intended to prevent inflation expectations from falling to dangerously low, even negative, levels, as they seemed about to do last summer. And in this it was successful. The deceleration in growth was associated with a series of unfortunate one-off events: severe winter weather, a spike in oil prices as a result of the Libyan uprising against Colonel Ghaddafi, and the tsunami and nuclear disaster in Japan. But rather than accommodate these supply shocks by allowing prices to rise as would be natural in the face of a supply shock, pressure built to tighten monetary policy to counter the supply-driven rise in prices, with results that are now becoming all too evident: rapidly falling inflation expectations and real interest rates.

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