While many top economists have suggested that housing and credit sectors have bottomed, most have still been watching and waiting for retail sales and consumer spending to give more legs to Federal Reserve Chairman Ben Bernanke’s comments that the recession is over. Perhaps Tuesday (September 15) morning’s August retail sales report is just the medicine investors and consumers are looking for.

According to the Commerce Department, retail sales for August exceeded the forecasted two percent gains with a rise of 2.7 per cent in sales. July’s revised sales showed a .2 per cent decline. Apparently, the back to school sales combined with higher auto sales due to Cash for Clunkers helped create a late summer buying “binge”.

Consumer confidence has yet to show that Americans have completely bought into the sentiment that the worst is over and brighter days are ahead and maybe soon. Despite commentary from Bernanke and other top economists in the last several weeks, consumers appear to be much more cautious about diving back into the buy and spend way of life.

Looking at a retail sector breakdown gives more insight into way results were stable in July and better in August. The auto sales index, a gauge of interest in that arena, was up 11.9 per cent in July. Gas sales (up 5.1%) and clothing and department store sales (up 2.4%) were also among the positives.

Furniture (down 1.6%) and building & garden equipment (down 1.2%) were leading sectors that still struggled with the tough economy. Some analysts were eager to instill a sense of reality from investors and consumers who might read too much in to the August retail sales gains.

It has been suggested that gains in auto sales typically come with increased monthly debt for consumers, since most cars are purchased with some financing. Additional monthly debt obligations mean less discretionary income for other retail purchases.

Since much of what happens in retail is based on the amount of confidence that consumers have in the economy, including their jobs, much of what happens in the next couple months will be based on what consumers think about the prospects for the economy.

Unemployment sits just shy of ten per cent, but jobless claims have been down slightly or flat the last several reports. If consumers feel comfortable that their paychecks will keep coming and they are confident in Bernanke and the economic leadership’s view, retailers should benefit during the last quarter of 2009.

Neil Kokemuller
9:03AM EST
Wednesday, September 16, 2009

Neil Kokemuller is an Associate Professor of Marketing at Des Moines Area Community College in Des Moines, Iowa, USA. He has a MBA from Iowa State University. He is also in house stock market commentator at Live Charts UK, where you can find real time charts and share prices.

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