Wednesday, May 13, 2009

Spraying Round-Up on the Green Shoots of Recovery

Today the Commerce Department reported that April retail sales declined by 0.4% which followed a downward revised 1.3% drop in March. The data signalled that the consumer rebound of January and February was ephemeral and that despite optimism about the stimulus package and the Obama Administration, consumer spending is being weighed down by rising unemployment and falling asset prices. Put bluntly the data sprayed the weed killer Round-Up on the emerging green shoots of recovery.

As a result real consumption after rising by 2.2% in the first quarter will likely decline in the second quarter thereby marking down GDP projections. Thus it is no surprise that stocks are down about 2% as of 3:00 PM today.

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