The news on retail sales is much worse than anticipated:
NEW YORK (CNNMoney.com) — Retail sales fell for the sixth straight month in December, the longest consecutive stretch of monthly declines in the measure in at least four decades.
“Consumers aren’t spending and that’s not good for the economy,” said Scott Hoyt, senior director of consumer economics with Moody’s Economy.com…
Retail sales reflect the state of consumer spending which in turn fuels two-thirds of the nation’s economy.
To that end, the Commerce Department said Wednesday that retail sales tumbled 2.7% last month, compared with a revised 2.1% drop in November. November sales were originally reported to have fallen 1.8%.
Economists surveyed by Briefing.com [link to economic calendar page] on average had forecast a decrease of 1.2% for December.
Sales excluding autos and auto parts also fell a much worse-than-expected 3.1% in December, compared to a revised 2.5% decline in November. Sales minus auto purchases were originally reported to have declined 1.6% in November.
Economists had forecasted a decrease of 1.3% in the measure, according to Briefing.com
“We’ve never had this long stretch of declines,” said Michael Niemira, chief economist with the International Council of Shopping Centers (ICSC), who has analyzed the government’s monthly retail sales numbers going as far back as 1967.
“This current situation is a reflection of a tough, tough environment,” he said. “Consumers are buying only essential items. Credit restraints have really impacted sales of big ticket purchases.”
“Moving forward, the question is whether this is the low point and could we get some moderation in retail sales in 2009,” Niemira said. “We haven’t seen a lot of convincing data to that effect.”
Yes, the decline in consumer spending isn’t good for the strength of the economy, but folks aren’t going to start consuming again until they’re back on secure economic footing–meaning fundamentally, they need (good and lasting) jobs. Putting more money in the hands of households through tax cuts will provide some needed assistance to American families, for sure. But it won’t encourage them to buy things they cannot afford (beyond their perception of the boost to their discretionary income provided by the temporary tax cut), nor should it.
Now is not the time to try in vain to get the private sector to consume. It’s only the public sector who is in the mood to spend right now, and it’s only the public sector who can afford it. If government spending is able to “fill in for” private-sector consumption, that will be one of the best ways to marry the goals of short-term economic stimulus and longer-term economic growth. In fact, economists who are not so worried about the longer-term implications of the large amount of public-sector dissaving (deficit spending) that is now occurring, are not so worried because they’re actually counting on the private sector to step back from its consumption binge. Goldman Sachs, for example, has said they are not troubled by the implications of the surge in government borrowing in terms of America’s reliance on foreign capital, precisely because they “are optimistic that the markets will absorb this surge in government borrowing because it is matched by an even greater drop in private borrowing” such that “private sector saving will finance more than 100% of the incremental public sector dissaving” (from Goldman’s December 31, 2008 U.S. Economic Analyst newsletter).
In other words, we’ve got to count on government to do the “work” of consuming right now, while we ordinary Americans hang tight, just hold onto or find our jobs, and only buy stuff we feel we can comfortably and sensibly afford.