Just when it looked like the trend in retail sales was set to flash a danger sign for the business cycle, consumers rallied with a sharply higher rate of spending. Headline retail sales increased 0.4% in October, reversing September’s flat performance and rising the most since June. The gain surprised most analysts, based on the consensus forecast, although the pop was only a touch stronger than The Capital Spectator’s average econometric forecast. More importantly, the year-over-year change in retail spending finally turned up after three straight months of decline. That’s a clue for thinking that the recent weakness in consumer spending isn’t a sign of deeper troubles for the business cycle.
Daily Archives: November 20, 2013
Is European Disinflation/Deflation Coming To The US?
The sharp drop in the annual rate of consumer price inflation in the Eurozone in October (0.7% vs. 1.1% for the previous month) looks like a warning sign that the winds of disinflation/deflation are strengthening (pdf). If so, that’s an ominous trend given the feeble growth rate for Europe overall. No wonder that the European Central Bank announced an unexpected cut in interest rates earlier this month. One threatening report isn’t a trend, however, and so it’s unclear if October’s weak inflation report is a sign of things to come or just a one-time quirk. We’ll know more when we see the inflation report for November. Meantime, what about the US? Is inflation decelerating here as well? The answer depends on your preference for estimating inflation.