Moe Zulfiqar: Since the beginning of the year, we have been seeing economic data that suggests consumer spending in the U.S. economy is in trouble—we have seen menial growth, if not negative growth. If this trend continues, it could be very dangerous, since consumer spending is an important factor for calculating the U.S. gross domestic product (GDP).
We recently heard from the United States Census Bureau that retail sales in the U.S. economy increased by 0.3% in February compared to January, and they were up by 1.5% from the same period a year ago. (Source: “Advance Monthly Sales for Retail and Food Services for February,” U.S. Census Bureau web site, March 13, 2014.)
This number sent a wave of optimism through the U.S. economy, since retail sales numbers are an indicator of consumer spending and they were in a decline for three months.
Sadly, it appears not many are looking at the long-term picture of consumer spending and how it’s behaving. The month-to-month changes in retail sales shouldn’t be taken very seriously—these data usually get revised. For instance, we originally heard that retail sales in January declined by 0.4%; that was later revised lower to 0.6%.
If you look at the year-over-year change in retail sales, it will start to show you the poor image of consumer spending in the U.S. economy. Please take a look at the table below; it summarizes the year-over-year change in retail sales in February from 2008 to 2014. (Note: the period date identifies the change from the year prior to that specified date; so for example, February 2008 represents the year-over-year change from February 2007 to February 2008.)
|Period||Change in Retail Sales|
Data source: Federal Reserve Bank of St. Louis web site,
last accessed March 14, 2014.
It is very evident; the increase in retail sales in February of this year isn’t as great as it looks. In fact, it is the second-worst in the last six years. The biggest decline was in February of 2009—this is when the U.S. economy was in the midst of a severe economic downturn.