According to the Wall Street Journal, 27 of 47 economists say the recession, which began in December 2007, has ended. If the recession has ended, the retail sales numbers suggest a double-dip is in the works.
The Fat Lady ain't singing yet
It ain’t over til it’s over and the fat lady isn’t singing yet! A growing number of economists apparently believe the recession is over. According to the Wall Street Journal, 27 of 47 economists surveyed say the recession, which began in December 2007, has already ended. Another 11 economists say the recession will end by September.
Well, Thursday’s retail sales figures threw some cold water on that idea. At the very least, if the recession has ended, the retail sales numbers suggest a double-dip is in the works. The consensus expectation was for a 0.8% rise in retail sales in July, but as it turns out sales fell 0.1%. They fell 0.6% if you take out autos sales, which got an artificial boost from the “cash for clunkers” program. That program is merely bringing future sales forward. It is not going to create a long-lasting increase in auto sales.
Of course, some retailers are doing better than others. Wal-Mart (WMT), where it seems most of America now shops, is doing better than others. Yet even Wal-Mart is struggling with second-quarter U.S. sales falling 1.2%.
High-end retailers that are trying to hold the line on pricing are really getting hammered. For example, Abercrombie & Fitch (ANF) reported a 30% drop in same-store sales for the second quarter. Some of its competitors are doing better, but only because they are willing to discount their merchandise.
U.S. GDP is heavily dependent on consumer spending. Just as stock prices are often pressured by investor sentiment, consumer spending is strongly influenced by psychology. Some economists and government officials seem to think that consumers will believe the recession is over if we just tell them its over. Then they will start spending again and the recession really will be over. In other words, we will have a self-fulfilling prophecy.
However, at this point, declaring the recession over is simply premature.
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I think the very people who are telling us that all is well and the bad man known as “Mr. Recession” is now gone are the same people who report with their heads in the sand. Small businesses are at a standstill, layoffs are continuing, unemployment rising, more and more of the unemployed are finding themselves without any benefits because their time has run out. We now have a country with more and more walking zombies who simply go through the motions daily of finding a job, at least it gives them something to do. All of this is going on as our government spends more and more daily as if we were in boom times. I think we will see boom times, or is that bust times? If you think numbers are bad now, wait three months and see what the holiday shopping numbers will look like……..
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