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Tuesday, February 14, 2012

What Happened to the Great Consumer Recovery?

The Sun Times details:

Americans rebounded from a weak holiday season and stepped up spending on retail goods in January. The latest government report on retail sales pointed to a slowly improving economy.

Retail sales rose at a seasonally adjusted 0.4 percent last month, the Commerce Department said Tuesday.

Consumers spent more on electronics, home and garden supplies, sporting goods, at department and general merchandise stores and at restaurants and bars. They also paid higher prices for gas.
The last sentence is key... that 0.4% figure is in nominal terms (we'll find out what the real level is Friday when the consumer price index is released). The below charts convert retail sales from nominal to real (I am being conservative with a flat inflation rate for January, whereas a 0.1% increase is forecast).

What we see is a rebound from 2009 crisis lows in both real and nominal terms, but a recovery that has yet to make a new high in real terms.

On a year-over-year basis, it looks like the consumer recovery is slowing down in nominal and, even more so, in real terms.

Source: Census / BLS