Economy Watch: Retail Sales Inch up in August
By Dees Stribling, Contributing Editor
U.S. retail sales increased by a smallish 0.2 percent in August compared with July, according to the Census Bureau on Friday. All together, adjusted for seasonal variation and holidays, but not for price changes, total sales were $426.6 billion. That also represents an increase of 4.7 percent compared with August 2012.
Disregard gasoline—which is notoriously like a roller coaster in the way its price moves—and the increase in retail sales for August was only 0.1 percent month-over-month. The annual increase without gasoline, however, was 5.4 percent, according to the bureau.
Some classes of retail goods naturally did better than others in August. Sales of autos and auto parts were up 0.9 percent month-over-month, and 10.9 percent since this time last year. Electronics were up 0.5 percent for the month and 3.1 percent for the year. By contrast, building supply stores saw sales fall by 0.9 percent for the month, and clothiers lost 0.8 percent of their sales in August.
FOMC to decide on tapering (maybe)
The eyes of the world—or at least economists and business pundits—will be on the Federal Open Market Committee this week, which will meet on Tuesday and Wednesday. The Fed will very likely announce whether it’s planning to do a tapering of QE3, its bond-buying program that serves to stimulate the economy. At this point, all predictions about what the Fed will do are guesswork, but one possibility is a modest tapering—a drop of $10 billion in bonds a month going forward ($85 billion a month vs. $75 billion).
No one is expecting any kind of increase in the federal funds rate this time. Earlier this year, most FOMC members—fully 14 out of 19—determined that the first increase wouldn’t happen until 2015. Three participants judged 2014 would be a good year for an increase, and a lone member thought 2016 would be right.
Whatever happens that far in the future, former Treasury Secretary Lawrence Summers will not be chairman of the Federal Reserve. He withdrew his name from the short list of contenders for the job on Sunday, citing a potentially “acrimonious” nomination process. Fed Vice Chairman Janet Yellen is now considered the favorite to replace Ben Bernanke, whose term ends in January.
California town to acquire underwater mortgages
Richmond, Calif., has approved a plan to use its powers of eminent domain to acquire underwater mortgages within its town at deep discounts to the properties’ market valuations. The town says it will be working with Mortgage Resolution Partners to buy the mortgages, with the idea of making the loans more affordable for the homeowners.
Other cities have floated this idea, but none has gone ahead with it. Opposition to it is fierce, particularly in the mortgage markets, which see it as a clear danger. The FHFA has announced that it will press the GSAs, which it oversees, to limit their dealings with places where this strategy is used, and lawsuits against Richmond’s move are certain.
Wall Street continued its upward movement on Friday, with the Dow Jones Industrial Average gaining 75.42 points, or 0.49 percent. The S&P 500 advanced 0.27 percent and the Nasdaq was up 0.17 percent.Tags: Census Bureau, economy watch, retail sales