Real retails sales are off roughly 9% for the 9th month in row. When will they rebound? Perhaps never.
Take a look at a chart of consumption spending as percentage of GDP.
The norm that prevailed throughout the 50s, 60 and 70s was roughly 62%. A little less than two thirds of our economy was accounted for by consumer spending.
Beginning in the early eighties that percentage started to rise, reaching its recent plateau around 2001. Why this happened is an interesting question in its own right, but I want to think about is whether or not the pattern is reversing itself quickly as it appeared to do in the late 1940s.
Our current retail spending is roughly 9% lower than last year. If we take the consumption spending from the last 20 years and lower it 9% we get this.
A reduction in consumer spending by 9% takes us back to the levels that prevailed for decades. The question is that if consumer spending is going to follow a permanently lower path, what is going to take up the slack?
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Tuesday ~ July 14th, 2009 at 8:54 pm
teageegeepea
Casey Mulligan thinks the rise from June to February is mostly inflation. A common hobby-horse on his blog is non-residential construction picking up the slack left by the glutted residential market. Tyler Cowen mocks the kind of question you’re asking here. I think its worth asking even if causality is another step behind the answer.
Tuesday ~ July 14th, 2009 at 11:10 pm
Karl Smith
Whoops, I put the new release into my chart for real sales. I’ll adjust tomorrow although I am guessing that the roughly 9% down year over year doesn’t change much.
I take it Mulligan is basing his estimate on the big 8.4% gain for gasoline stations.