Pinching Pennies

Pinching Pennies

Supposed signs of improving conditions for the consumer were obviously a bit premature. After last week's better-than-expected monthly sales reports from several of the nation's largest retailers, expectations were getting better-not a lot, but anything is an improvement. Unfortunately, any luster faded following yesterday's release of comprehensive retail sales data from the Census Bureau for the month of February. Although there were a few positives to be found in the report, nearly all major types of retail outlets had a terrible month with housing-related categories leading the way.

Reflecting the sour mood, the University of Michigan Consumer Sentiment survey showed confidence slumped to its lowest reading in 16 years as consumers have taken notice of soaring gasoline prices and broader inflationary pressures. In fact, the report indicated a big jump in consumers' inflation expectations for the next year, increasing from 3.6 to 4.5 percent. While the Fed will pay closer attention to readings from core CPI, which showed no increase from January, Bernanke and Co. do keep track of this since well-anchored inflation expectations are very important to the Fed's ability to pull policy levers that affect growth.

Conditions are now expected to remain weak through the spring, but begin to pick up as the money from tax rebate checks start to roll in. Even then, some analysts believe the rebate checks will only go towards filling up consumers gas tanks and do little, if anything else. Others, however, expect the checks will be used to gas up the car, head to the mall and buy an iPhone or a high-definition TV.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.