Retail sales up
Posted by Peter W. Schramm
Are we, or are we not, in a recession? I was on a panel the other day with a liberal economist and he explained that we were, for sure. I thought I was persuaded. And yet this today:
retail sales sales jumped by the largest amount in six months. The biggest increase since November. I know nothing. Just passing it along.
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Two words: "stimulus package".
Right, John, and although everyone is feeling pain at the pump and grocery store, we've still not had negative growth in a quarter yet. Yup, I guess we're in a recession, which now means a growing (albeit, limply) economy.
Technically, we are not in a recession.
Emotionally? Americans probably consider themselves in a recession.
And every few days, Americans are making the journey to the pump, ---------------------- and they're not happy with what they're seeing. Speaking for myself, I'm not too pleased with the gas mileage of my brand new vehicle, which still has the temp tags on it, and gets about 20 miles per gallon.
I find myself relating the price of everything from dinner out, to the shoes I bought for my daughter, to what it costs to fill my gas tank, which is nearly $60. That lasts about a week, if I am really careful. We may only be flirting with recession in a technical way, but I feel the same dread at prices as I did in the Carter years.
We used our stimulus package to pay off debt.
A recession is defined as 2 consecutive quarters of negative economic growth. US economic growth has slowed. It's been 0.6 the last 2 reported quarters. It's not a good economy but it's not a recession.
I agree with Kate--we may not be in a recession, but I have started to review everything I buy. Yes, my frozen coffee's at the local coffee house are only $4.00, but if I buy one a week, that is $16.00 a month, which is the same cost as my daughters swim lessons. That makes me want to give up my coffee's so my daughter can swim for a month (which is healthier for both of us in the long run!). But, then I worry about Gas and the 8 mile drive into town to get the Y...
We used our tax refund to make necessary repairs around the house--new doors and windows--which should save us in heating costs this winter...
Joke overhead at the park from a third grader: "Your Mom is so stupid, she sold the car to pay for gas money."
Parent comment on hearing said joke: "That doesn't really sound so stupid anymore!"
Julie, Your joke reminded me of a sign someone put on their lawn in Jamestown NY--"Beer is cheaper than gas...Drink don't drive!"
Might it be the case that high gas prices cause people to make fewer trips to stores? Also with high cost of fuel all prices seem relatively lower in terms of trip cost. Result: make fewer trips and buy more on the trips you do make. We might expect that people might buy more simply because people do not wish to have to make smaller trips so they buy whatever they think they might need so as to have to make fewer trips. So high gas prices increase impulse buying, we want to buy whatever we think we might possibly need or want(because the opportunity cost of defering purchases increases in terms of psychologically over-relevant/heavy trip cost.) If we are making more trips to stores then we are less likely to do impulse buying because we figure that we can always pick it up on our next trip if we need it then. Also with higher gas prices the cost of driving around to shop increases so we are less likely to bargain shop and more likely to one stop shop. This decreases elasticity of demand which is more supressed when people shop around more and are more price sensitive. Which means that higher gas prices actually make people less price sensitive. Also the higher cost of fuel drives up the cost of all goods on the supply side. Also remmember that Retail sales are simply expressed in dollar terms...When the cost of fuel goes up it should be no suprise that retail sales expressed in dollar terms should also increase.
The jury is still out. This is a strange economy. Some sectors are booming. Some sectors are in a steep decline. Living standards are falling but any drop in employment so far has been insignificant.
I think even the concept of recession is inadequate for what is going on. For that matter the "stimulus package" is truly irrelevant for fixing the economy.
Some steps that might facilitate the necessary adjustments:
1) strengthen the dollar by raising interest rates.
2) prevent the collapse in the housing market from creating a credit crunch.
3) sell oil from the strategic reserve in significant quantities whenever the price of oil exceeds $120 per barrel.
4) open up federal lands and the seacoast for drilling.
5) create a legal and regulatory environment favorable to the development of nuclear power.
6) begin to phase out subsidies to biofuels production.
7) work off the excess inventory of residential housing by easing immigration for people who are willing and able to buy a house and live in it for 10 years.
8) make permanent the tax cuts that are set to expire.