Consumer Spending Takes a Dive: Is the Economy in Trouble?

Retail Sales Plummet

Yo listen up fellas! The Commerce Department just dropped a bombshell consumer spending in January took a nosedive. Retail sales fell by a staggering 0.8% and that's after a meager 0.4% gain in December. Looks like Uncle Phil's pocketbook is feeling a little lighter this year.

Not So Rosy Picture

Now don't get it twisted. Economists were expecting a decline but this drop was way more than anyone had anticipated. Even when you remove those fancy cars from the equation sales still dropped 0.6%. Ouch! Guess the Fresh Prince will have to put off that new whip he had his eyes on.

Spending Lags Behind Inflation

Here's the scoop folks. The sales report takes into account seasonal factors but not inflation. And let me tell you prices be goin' up! In January headline inflation rose 0.3% and if we take out food and energy prices it was a whopping 0.4%. That makes the year over year readings 3.1% and 3.9% respectively. Looks like our money just can't keep up with the rising costs.

Winners and Losers

It ain't all bad news though. Restaurants and bars saw a slight increase of 0.7% in sales. So we can still drown our sorrows in a tall glass of lemonade or maybe even a fancy cocktail. But on the downside building materials and garden stores took a hit with a 4.1% decline. Sorry Uncle Phil no more home improvement projects for now.

Growth Concerns and Happy Surprises

The control group of retail sales which excludes items like food service autos gas and building materials fell by 0.4%. This number is crucial for calculating the gross domestic product (GDP). And let me tell you GDP growth has been quite the rollercoaster lately. On the bright side the labor market seems to be holding strong with initial claims for unemployment insurance declining and regional surveys in the manufacturing sector showing signs of improvement. Looks like it's not all doom and gloom.

Feeling the Impact

So what does all this mean for us regular folks in Bel Air? Well it's not the end of the world but it's definitely a wake up call. We might have to tighten our belts a little and think twice before swiping that credit card. But hey with real wage gains and more people finding work we should still be alright. The economy might not be booming but it won't be turning into the Wild Wild West either.