Buy, buy, buy!
Despite the fact that the personal savings rate in June 2005 hit 0.0%, Americans have decided to buy yet more things in July.
U.S. retail sales surged 1.8 percent last month as buyer incentives led to the biggest gain in auto sales since just after the Sept. 11, 2001, attacks, when carmakers flying the flag put in place zero percent financing deals, a government report showed on Thursday.Of course, this big increase is fueled mainly by auto sales which are purchased mainly on credit. The methodology of the Commerce Department tallies the full purchase price in its computation of personal consumption expenditures on the month (even though these cars will be paid off over years), and thus we are almost certain to see a negative personal savings rate for July. You heard it here first.
July's retail-sales jump followed a similarly healthy 1.7 percent rise in June, the Commerce Department said. However, the increase fell short of Wall Street forecasts for a 2.2 percent gain.
Auto sales shot up 6.7 percent, their sharpest rise since October 2001, as Ford and DaimlerChrysler joined General Motors in extending employee discounts to all consumers.
The retail and food services sector has recovered nicely from its brief hiccup in May. Since then, total sales are up an annualized 21% -- twice the pace of the last twelve months (all data is nominal and seasonally-adjusted). This is all about cars, however. Total retail and food service sales excluding motor vehicles and parts dealers is up only 7.0% annualized since May and up 8.1% since July 2004. Over the last six months, non-auto related sales are up 7.5% annualized. I think you all can see the declining trend here.
Especially interesting is sales by housing related sectors. Furniture and home furnishing stores saw sales change -1.3% for the month; building materials, garden equipment and supply dealers had sales -0.4%. Over the last three months, furniture and home furnishings sales are up 2.7% annualized while building materials et al. is up an annualized 0.8%.
Are those rising interest rates finally pulling the plug on housing?