Today’s release of May retail sales data was greeted with boos as it showed the first outright monthly decline in consumer spending—and a sizable one at that—since last fall. As we’ve preached in earlier posts, interpreting a trend from one month’s worth of data is a mistake, particularly when subsequent revisions can change the picture significantly or seasonal adjustments can yield quirky estimates. Moreover, things like expiring federal tax rebate programs for homebuyers and energy-efficient appliance purchases can have large one-time effects. Instead, taking a longer-term view (say the past 6 or 7 months), retail sales point to guarded consumer optimism that should improve as the labor market recovers and generates income growth sustained by rising wages instead of federal transfer payments.

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