Why the Soft GDP May Foreshadow Light Spending
While Black Friday is another seven weeks away, there is already mounting speculation on how good the holiday shopping season will turn out to be for the retail sector.
A strong fourth-quarter for the retail sector could boost the country’s gross domestic product (GDP) growth, since consumer spending accounts for about 70% of the GDP. The second-quarter GDP (third estimate) reflected the current stalling in U.S. consumer spending, as the GDP growth of 1.3% was well below the estimate of 1.7%. This represented the slowest rate of growth since the third quarter of 2011. (Source: “Economic Calendar,” Yahoo! Finance.)
Given this, you kind of have to wonder about the underlying strength of the consumer spending. GDP is estimated to grow at 2.7% in the U.S. in 2013. (Source: “2013 Economic Statistics and Indicators,” Economy Watch, October 5, 2012.) This implies a slight rise in consumer spending.
The retail sector is showing improvement in sales, but consumer spending on durable goods was horrible in August, when spending on non-essential goods and services cratered 13.2% (source: U.S. Census Bureau News, U.S. Department of Commerce, September 27, 2012), versus the -5.0% estimate and the -4.1% in July (source: “Economic Calendar,” Yahoo! Finance). Even when you eliminate the transportation portion, consumer spending on durable goods fell 1.6%, again worse than the -0.2% estimate and revised -1.3% in July. Read More http://www.investmentcontrarians.com/stock-market/why-the-soft-gdp-may-foreshadow-light-spending/771/