Courtesy of Tim Iacono, at The Mess That Greenspan Made
The engine of growth shifts into reverse
The Census Bureau just released the September retail sales data and the news was even worse than expected, all but assuring negative GDP growth during the third quarter.
Last month’s plunge of 1.2 percent, along with downward revisions for both July and August, mark the first time since government record-keeping began in 1992 that retail sales have fallen during three consecutive months. This should remove whatever doubt remained regarding whether or not the U.S. is currently in a recession.
Note that these figures are not adjusted for inflation and would be much, much lower in real (inflation-adjusted) terms.
The declines were broad-based with sales rising in only two categories – a 0.4 percent gain for health and personal care products and a 0.1 percent increase at gasoline stations.
The fallout from the bursting of the housing bubble is clear to see at furniture and home furnishings stores where sales plunged 2.3 percent last month and are now down 10.7 percent on a year-over-year basis.
It’s hard to see how these sales will rebound anytime in the next year or so.
After the energy shock over the summer and the slowing economy, the automobile sector is now in complete disarray with sales falling 3.8 percent last month and down a whopping 18.5 percent from a year ago.
The economic model of a zero-savings rate populace (i.e., where after-tax income less consumption is at or near zero) combined with consumer spending that accounts for 70 percent or more of economic growth was, without a doubt, a very poor one.
