On Bloomberg Television recently Harvard economist Steven Roach put in her place a retail sales consultant who was crowing about strong retail growth. Roach pointed out that after discounting for inflation growth in retail sales compared to past years is mostly an illusion. I wish he had gone to the next step and pointed out that what little growth does exist is built on a foundation of demand from huge government deficit spending. To make things worse the government has been forced to borrow much of that money.
Part of the poor outlook for consumer spending comes from the inability
for people to use their homes as a ATM, this abruptly ended in 2008 and
was a large driver in causing the bubble to burst. While super low interest rates have allowed people to refinance homes and cut their monthly payments they have also devastated the incomes of those with savings causing them to curtail spending. Slow job creation, coupled with many
of the jobs being created at the low end of the pay spectrum, is now being effected by another recent occurrence, hours are being cut by many
employers because of Obamacare.
Bottom-line good jobs are scarce and incomes are not rising. More deleveraging is facing Americans, this will go on for years. Some consumers have worked hard and paid down the debt that they accumulated, others have simply walked away from their debts and taken the path of bankruptcy. Those that remain in houses where they have not paid their mortgage for months or years have supplemented discretionary spending.Consumers Are In a Protracted Period Of Weakness, you can stop talking about strong retail sales till more good jobs materialize.
Thank you for reading my post. Most economist see creating more jobs as a way out of this quagmire but this is no easy task. If you have time please read one or all of these post that focus on how difficult that tends to be;