Economy Watch: Retail Sales See Unexpected Spike

According to Commerce, spending was up month-over-month by 1.1 percent, the largest gain since early this year.

By Dees Stribling, Contributing Editor

Apparently Americans had had enough dispiriting news over the summer, and decided they wanted to go shopping in September. That’s one possible interpretation of the month’s retail sales that were released by the U.S. Department of Commerce on Friday. Another is that the economy isn’t quite as close to the precipice of another recession as generally feared.

According to Commerce, spending was up month-over-month by 1.1 percent, the largest gain since early this year. Leading the way were car sales—up 3.6 percent—but even without cars, the monthly sales increase was 0.6 percent, buoyed by clothing and even furniture, which has been a sickly retail segment for quite some time. August’s monthly figures were also revised upward to show a 0.3 percent increase, up from zilch.

Separately, Commerce reported on Friday that business inventories expanded in August by 0.5 percent. Total inventories were up to $1.53 trillion, a 10.5 percent increase from August 2010. This too seems to be a glimmer of hope that the U.S. economy isn’t quite as bad as it’s generally assumed to be, since businesses are voting with their balance sheets to increase inventories for the coming months.

Consumer sentiment down again

Consumers might have been spending more, but they’re still bummed about the general state of the economy, according to the latest Reuter’s/University of Michigan’s consumer sentiment, which was released on Friday. According to the report, the index—which had improved slightly at the end of September, rising to 59.4 compared with 57.8 at mid-September and 55.7 at the end of August—dropped again in mid-October, when the reading was 57.5.

Though the index is up a little compared with the pit of August, it’s still as low as it has been since the darkest days of early 2009. The expectations component of the index is where things are really lagging, with expectations coming in at 47.0, down 2.4 points from the end of September. The assessment of current conditions also took a hit in mid-October, settling down 1.1 points to 73.8.

What can account for the difference between consumer sentiment, which no doubt correlates in some way with consumer buying patterns, and the strong September retail report? Maybe the retail report is a fluke. Or maybe Americans, fed up with hearing bad news on television and various other media channels, decided collectively to do some shopping to help forget about those woes and the fact that they expect things to get worse.

G-20 makes promises, protesters turns up volume

The G-20 met over the weekend in Paris and then issued a communique that said they “stand ready” to provide money European banks to tamp down the euro-zone debt crisis. The 20 nations (most developed, but also some big developing nations) also spoke of an “action plan” to spur growth and help keep the world from lurching into another 2008-style panic. Presumably the plan would mean more funds for Greece, more for Euro-banks exposed to Greece, and more for the European Financial Stability Facility, just in case.

Meanwhile, on the streets of Europe and North America, protesters decried economic inequality, in some cases (Rome) violently. Lately the movement has taken up a “99 Percent” rallying cry, which might ultimately prove more catchy than “Occupy” here or there, since 99 Percent speaks to the aspiration that the developed world shouldn’t become like the developing world in terms of wealth distribution—that is, overwhelming wealth at the top and not much else for everyone else. Exactly what kind of traction this idea will get isn’t clear yet, but it’s certainly getting attention—and donations, reportedly about $300,000 and masses of food and supplies for Occupy Wall Street.

On Friday, the metaphorical Wall Street was chipper, with the Dow Jones Industrial Average gaining 166.36 points, or 1.45 percent. The S&P 500 advance 1.74 percent and the Nasdaq was up 1.82 percent.

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