Economic Update:  Good News in Retail Sales

12.11.2009

The U.S. Census Bureau reported today that national retail sales were up compared to last month and last year.    As of this writing, equity markets are up in response to these numbers that exceeded expectations.

Yesterday, the Federal Reserve also reported that household net worth increased by $2.7 trillion in the second quarter.   While it may appear that these two pieces of information are distinctively different, there is a link.

Source:  www.barrons.com

As household wealth is replenished, due to stabilizing home values and an increasing stock market, the consumer will gradually begin to regain confidence and resume spending.   A stabilizing labor market will also help drive the consumer to additional spending.   The question going forward is the new equilibrium level of consumer spending at the household level.     The level and resumption of this spending will be dictated by the replenishment of household wealth.  As household wealth increases, the width of the U, in a U shape recovery, will shrink.  In essence, we will observe a faster recovery.

This was also evident in today’s consumer confidence number.   The University of Michigan consumer confidence number came in at 73.4, and the expectation was 68.8.   Consumer confidence is driven by several factors, but two important factors are household wealth and job security.

Source:  www.barrons.com

Unemployment Claims

Yesterday the Labor Department reported that new claims for unemployment increased from the previous week.  The less volatile 4-week moving average declined slightly.  As claims continue to decline, we should continue to see stability in the unemployment rate, and gradual declines as we move toward job creation.    Unfortunately, Indiana actually reported an increase in unemployment claims of over 2,000.   The reason cited was layoffs in automotive and manufacturing industries.

Source:  www.barrons.com

The four Indiana counties of Southern Indiana continue to see declines in new and continuing claims for unemployment.    The last several weeks of data do point to a flatter level in both new and continuing claims however.    Future data will tell us whether or not the downward trend will resume.

Suggestions

If you have any suggestions on future columns or research about specific industries or other economic data, please send me an email at udufrene@ius.edu.

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This information is provided by

Uric Dufrene. 

Uric Dufrene, Ph.D. holds the Sanders Chair in Business in the School of Business at Indiana University Southeast.  He conducts research on local and regional economic trends, and teaches corporate finance at the undergraduate and graduate levels.   He previously served as dean of the School of Business.