Update1 Retail Sales Decline As Savings Increaseby Tim Manni
Retail Sales dropped a more-than-expected 0.4% in April, after most economists had predicted a small increase. “Core” sales, excluding autos and gasoline, declined 0.3%.
While the lack of a positive rebound from March’s drop of 1.3% sent stock market futures down this morning, the rate of decline didn’t increase, and was a reasonable improvement from December’s low of -3.2%:
“There is no momentum in spending,” wrote Ian Shepherdson, chief U.S. economist for High Frequency Economics. “The freefall is over but shredded balance sheets and declining incomes mean a broadly flat trend is about the best we can expect.”
If you follow our blog, you’ll notice that we do our best to incorporate any “good,” or at least “improving,” news or statistics that we can find. A New York Times article published last week (hat tip: Calc Risk) wrote that perhaps the one lasting effect that Americans will take with them from this recession is a “shift to saving”; and that’s not a bad thing (at the moment). The “shift” has been regarded more out of necessity than a conscious change in behavior:
This shift back to thrift may seem to be a healthy change for a consumer class known for spending more than it earns, but there is a downside: American businesses have become so dependent on consumer spending that any pullback sends ripples through the economy.
Fearful of job losses and anxious over housing and stock declines, Americans are squirreling away more of their paychecks than they were before the recession. In the last year, the savings rate — the percentage of after-tax income that people do not spend — has risen to above 4 percent, from virtually zero.
Retail sales are expected to improve, but it will take time — months, some have said a year perhaps. When the threat of job loss begins to subside and wages begin to stabilize, so will purchases.
Be on the lookout for next month’s report to improve as tax refund checks should begin to make their way through the system.
Is it a safe assumption to say that most of you are concentrating far more on saving then you are on spending?
UPDATE1: What else has been affected by the nation’s increased savings? Visit our friend Fundmastery to see how the U.S. savings rate compares to the import numbers at the Port of Los Angeles.