Why Fall In Retail Sales Should Not Be A Cause Of Concern?

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Guy Berger, an economist at RBS Securities Inc., said that consumer spending was in good shape during the last quarter and on track to achieve a 4% annualized rate or more. The Commerce Department recently reported a drop in the U.S. retail sales; however, Berger and many other experts appeal to look beyond the headline number.

Michelle Meyer, another veteran U.S. economist at Bank of America Corp (NYSE:BAC), explained that the headline number could be even lower if we consider decline in spending at the pump, given the drop in gasoline prices. Once that is factored, the report will be in line with consensus estimate indicating consumer spending to improve throughout the year. Experts also believe consumer spending to improve with lower gasoline prices and stronger employment data.

In December 2014, the Commerce Department numbers showed 5% increase in gross domestic product from July through September, representing the highest growth since the third quarter of 2003. The growth numbers outperformed consensus estimate of 75 economists, who forecasted 4.3% growth in an opinion poll by Bloomberg.

The Commerce Department’s revised data for the third quarter already reflected stronger spending on recreation, health care and financial services than previously estimated. Household purchases also increased at a 3.2% annual pace, revised from previously reported 2.2%.

Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. (NYSE:JPM), also believes consumer spending to be on a pretty good track and will be supported by lower energy prices and improving labor markets heading into 2015.

The Commerce Department also reported that receipts at filling stations contributed 10% of total retail sales for the last year through November. Meyer believes that consumers haven’t been able to increase spending at other avenues, especially from their savings at the gas pump. However, going forward consumers would be able to do better than a year ago, says Berger.

Lisa Ray

Lisa Ray primarily covers Retail and Healthcare. Lisa Ray has completed her MBA (Finance) and an avid market tracker. She is a stock market analyst who closely tracks US markets along with other global markets like India. She has been expressing her views for years about markets and also advises various clients.

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