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Consumers Keep Spending--A Lot!

J: On July 16, the Census Bureau gave us wonderful news in their advnce retail and food services sales report for June. Consumers spent a phenomenal $506.8 billion that month, not only a new record but the second month in a row that exceeded half a trillion dollars on a seasonally adjusted basis.

Actual retail and food services spending without seasonal adjustment added up to an unprecedented $2.9 trillion for the first half of 2018. Clearly, continuing increases in employment and disposable personal income, coupled with very high levels of consumer confidence on all measures, have caused consumer spending to keep rising.

The following chart shows the monthly level of total retail and food services sales. You can readily see the very high levels in 2018. Total sales are now double where they were in 1999. The consumer price index (CPI) rose 51.5 percent from June 1999 to June 2018, so the increase since then is about half real (volume) and half because of inflation.

This next chart shows the year-over-year percentage changes. There you will note that the increases in May (6.5 percent) and June (6.6 percent) are the largest since the 6.7 percent rise in February 2012.

Interestingly, other than the price-increase-driven 21.6 percent rise in sales at gasoline stations, the biggest increase from a year earlier was 8.0 percent for "Food services and drinking places." No one knows why that generally-stable category was up so steeply last month. (L: Everyone's going out to celebrate their new jobs?) The category of "Food and beverage stores" posted a 3.9 percent year-over-year gain. (L: And staying in to celebrate their new jobs?--Or just eating and drinking a whole lot more for no reason?) The other big gainer was "nonstore retailers" (think Amazon and catalogs). They increased by 10.2 percent in June from a year earlier.

It is most obvious that consumers have both the ability and the positive attitudes to keep driving retail and food services sales to new records. This is one of our most important economic indicators, so keep watching these data. The Census Bureau will release the July data at 8:30am EDT on August 15. We'll be running an economic forecasting conference in Sitka, Alaska that day, but it is likely that all the attendees will greet the latest data with approval and delight.

So ,my advice? Keep shopping. The health of the US economy depends on growth in consumer spending. (L: Note that consumer spending does not necessarily require unfettered consumption of material goods. Obviously eating and other experience-based purchases count, too.)

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