Say what you will about the sluggishness of the recovery, but it is ongoing. Retail sales in October were only 2% shy of a new all-time high, after posting sizable gains in recent months. Sales rose an impressive 7.3% in the past 12 months, and gains were widespread. In real terms, sales were up a strong 6% in the past year. No signs here of any threat to future growth.
As a supply-sider, I don't believe that retail sales (i.e., "demand") drive growth. Growth is driven by "supply:" by work, production, investment, and risk-taking. The strength of retail sales is a sign that the economy is getting back to work and recovering its confidence. This is what portends continued economic growth going forward. If Congress can see its way to extend the Bush tax cuts (in light of the recent election and the sluggish recovery, what politician would dare vote to allow taxes to rise?) then confidence in the future and the incentives to take risk and start new enterprises will increase, and that should provide a significant boost to growth—and jobs—in the coming year.
Based on today's Retail sales ex Gas a formula I use tells me the
ReplyDeleteS&P 500 is undervalued at 1122 and
overvalued at 1347....
2% of an all time high seems like a function of flawed Census methodology. Sales tax revenues are up for example, but still noticably off from recent highs.
ReplyDeleteScott,
ReplyDeleteWhat's your take on the Empire State Manufacturing Index? It seems to be showing a lot of weakness, no?
That is a notoriously volatile index that can swing by 20 points at any time. It looks like an outlier to me, so I'm ignoring it in favor of all the other things that signal continued expansion.
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