Wednesday, November 20, 2013

Economy: The Virtuous Circle Of Climbing Retail Sales

(Drivebycuriosity) -  Surprise, surprise. This morning we learned that US retail sales rose 0.4% in October, more than the pundits had expected (+0.1%) (businessinsider). The numbers include a solid performance of furniture (1.0%) and electronics (1.4%).  Clothing sales and eating & drinking also rose 1.4% and 1.0%, respectively.

But, was that really a surprise? Consumer spending is getting a lot of tailwinds these days. The job market is healing: Last month the US created 204,000 new jobs, meaning more incomes available to spend. Many Americans are getting wealthier thanks to the ongoing rally on the stock market (S&P 500 plus 25% plus year-to-date) and to climbing home prices. Interest rates (including mortgage rates) are on record lows. And the prices for gas are falling. In October US consumers spend 0.6% less at gas stations, which marked the biggest drop since April (marketwatch). The average cost of a regular gallon of gas fell 4% in October and the price is down 11% since July.

Therefore, anything else than solid retail numbers would have been a surprise. As long as the positive constellation will prevail - and I think the combination will continue for a while because the global economy is getting stronger - retail sales will climb with a solid rate.

Btw rising retail sales are a boost for a lot of companies, not just for the retailers. Gainers are producers of furniture, electronics, clothing and more. Therefore the retail gaines translate into more jobs, more income and further climbing stock prices - a virtuous circle.

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