- Retail sales continue to make good, steady gains. The economy is clearly entering into a virtuous cycle of more jobs leading to more consumer spending. More retail sales in turn are leading to more job hiring by companies that produce things for consumers.
- In August, retail sales rose 5.0 percent from one year ago. That is the strongest gain in over a year. Spending related to the home is rising at a faster pace. Stores that sell building materials and garden equipment saw sales rise by 7 percent. Retail sales of furniture and appliances rose by a hefty 9 percent. Even so, the spending in this area is still in a recovery mode (not expansion mode) and still below the prior peak set during the housing bubble years.
- Past retail activity was also revised up a bit, translating into faster GDP growth. The second quarter GDP growth after revisions may be as high at 4.5 percent while the third quarter GDP growth is tracking to grow by 3.5 percent. Such solid GDP growth rate assures about 2.5 million net new jobs a year.
- When retail sales rise there should be a rise in demand for commercial retail spaces. Interestingly, the demand for retail commercial spaces has not been rising commensurately with the rise in retail sales. A big reason is that some sales are occurring through the internet. The demand for warehouse spaces has therefore been strengthening at a faster pace than for retail spaces.
- NAR projects the vacancy rate on industrial/warehouse space to decline from 8.9 percent a year ago to 8.4 percent by the year end. Meanwhile, the vacancy rate on retail space will barely budge from 9.8 percent to 9.6 percent.
- Most of the increase in retail sales appears to be driven from job creation and new income. But sales are also partly driven by an uptick in consumer debt, which has been on the rise recently. Debt in some cases makes good sense and provides nice returns. But in other cases it can cause unhappiness. Charles Dickens noted: “An annual income of 20 pounds and spending of 19 pounds results in happiness, while an annual income of 40 pounds and spending 41 pounds results in misery.”
