Retail sales very strong

December retail sales were a bit weaker than expected (up 0.6% vs. 0.8%), but they were still up by a significant amount. And as the chart above shows, retail sales have now fully recovered from the 2008-2009 recession, rising 7.9% in 2010. In the second half of last year, sales rose at a very impressive 11.2% annualized rate. This is indeed a recovery in every sense of the word.

But this recovery is a testament not to the indomitable U.S. consumer, but to the nature of this past recession. Much of the decline in the economy was the result of fear, which in turn caused people to hoard money instead of spending it. As fears have dissipated and confidence has slowly returned, money has been de-hoarded, driving up sales. This and other "forces of recovery" will continue to act in a virtuous cycle fashion, reinforcing themselves and continuing to drive the level of economic activity higher in the years to come.

Pulse of Commerce Index jumps

The Ceridian/UCLA Pulse of Commerce Index rose meaningfully in December, more than reversing the weak growth which we now know reflected a third quarter "soft patch." I show both the actual index (red) and the 3-mo. moving average here. The Index is based on diesel fuel consumption, and you can find more background color in Mark Perry's post here.

The trade picture brightens

The trade picture continues to brighten. In the three months ended last November, U.S. exports surged at a 18.7% annualized rate, while imports were basically flat. As Brian Wesbury notes, numbers like these could result in net exports adding more than 3 percentage points to fourth quarter GDP, possibly resulting in overall GDP growth of 5 or even 6% in Q4/10.

The strong rebound in exports (which as of the end of the year were probably only 2-3% below the all-time high set in 2008, thanks to 17% annualized growth from last year's low) reflects not only strong demand overseas, but very strong performance from our own economy. International trade is a win-win for everyone, so it's quite heartening to see that trade levels are returning to their former levels despite the massive dislocations wrought by the global financial crisis in late 2008.