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

A Drop in Retail Sales

Well well well. It seems like consumer spending took a bit of a nosedive in January. According to the Commerce Department retail sales fell by a whopping 0.8%. I suppose someone forgot to tell the shoppers that Christmas is over. Maybe they were too busy washing their new cars from December's sales. In any case this decline is worse than expected. Even if we exclude those flashy autos sales still dropped 0.6%. Looks like the shops were about as empty as a Brummie's bank account.

Sales Lag Behind Inflation

Now here's a fun fact for you. The sales report may be adjusted for seasonal factors but it's not adjusted for inflation. So while prices go up faster than Aunt Polly's temper spending is lagging behind. On a year over year basis sales only increased by a measly 0.6%. Meanwhile headline inflation rose 0.3% and when we exclude those pesky food and energy prices it rose 0.4%. As Arthur would say 'There's inflation in the bloody air Tommy! We need to do something about it!'

Weak Spots in the Market

Some sectors really took a hit in January. Building materials and garden stores saw a whopping 4.1% decrease in sales. Can't blame them I suppose. Who wants to do home improvements when it's colder than a winter's day in Shelby Company Limited? Miscellaneous store sales fell by 3% and even motor vehicle parts and retailers saw a 1.7% decline. Looks like people were more interested in spending their hard earned cash at the local pub than fixing up their cars.

Good News for Restaurants and Bars

Alright lads and lasses here's a bit of good news. Restaurants and bars reported an increase of 0.7%. Looks like people are still keen on drowning their sorrows with a pint or two. Can't say I blame them. The world can be a bleak place and a stiff drink can do wonders for the soul. Cheers!

Labor Market Strength

In the midst of all this economic turmoil there's a glimmer of hope. The labor market seems to be holding strong. Initial claims for unemployment insurance dropped to 212,000 below expectations. It's good to know that people are finding work and putting food on the table. After all a man's gotta eat and not just bread and cheese at Aunt Polly's.

Fed Keeps a Watchful Eye

The Federal Reserve folks always keeping their eyes peeled. They're satisfied enough with the current state of affairs and don't plan on raising interest rates anytime soon. But don't be fooled they're watching the data closely. They want more evidence that inflation is under control like a good Shelby watching the streets of Birmingham. Until they have that evidence they won't be making any moves. Keep your ears open lads and lasses the Feds are up to something.