On Wed, 13 Feb 2002, Doug Henwood wrote:
> Fred B. Moseley wrote: > > >The point that is missed by the newspaper headlines and these excerpts is > >that retail sales as a whole, INCLUDING autos, DECLINED by 0.2% in > >January. Not a huge decline, but a decline. > > > >The AP headline from the NY Times website was "Retail Sales Rise Sharply > >in January." Then the first sentence reads: "A drop in car sales ... > >pushed down sales at the nation's retailers by 0.2 percent in January." > > > >Then it goes on to say: "Excluding volatile automobile sales, overall > >retail sales rose by a solid 1.2 percent in January." > > There are two good reasons to strip away car sales - one, is that > they're normally volatile, and can provoke meaningless swings in the > headline number, and two, the 0% financing incentives last year stole > a bunch of early '02 sales. So anyone trying to measure the > underlying trend in consumption would want to see what's going on > ex-autos. But good progressive economists are irresistibly drawn to > the negative number. > > The weight of the evidence is that the U.S. economy is troughing, or > did bottom out around December. This could be a false bottom, a pause > before another downleg; the recovery could be weak, and might feel > little different from recession. But there's not much point in > ignoring the evidence. Doug, I don't think I am ignoring the evidence. Rather, the evidence is ambiguous. Strong auto sales was the main reason for the 0.2% increase in the GDP in the 4th quarter of 2001, which many economists hail as evidence that the recession is over. So now that auto sales are negative, are we supposed to ignore them and focus only on the rest of consumer spending? But the fact remains that total retail sales, as a proxy for total consumer spending, is now decreasing, rather than increasing at an annual rate of 5.4%, as it did in the 4th quarter. And thus the most important source of growth in the US economy right now seems to have been eliminated. My answer to your question in another post about whether increased consumer spending can be the cure for a recession caused by a decline in investment spending is NO. Because the decline of investment spending was caused by a decline of the share and the rate of profit, and businesses will continue in the months ahead to try very hard to increase profitability by cutting costs, especially wage costs. But such attempts to cut wage costs will also limit consumer spending in the months ahead. Fred
