Consumer spending comprises the bulk of economic activity this week, so we get important business out of the way early with the retail sales report from the Commerce Department Monday at 8:30.
Handicapped by Washington
The consumer has been restrained to a degree by Washington. The payroll tax cut expired at the beginning of the year, and $85 billion in mandatory federal budget cuts, or the so-called sequester, began to take effect in early March.
Although it hasn't grabbed headlines lately, global growth continues to be a concern for the United States as well.
Retail 'sails' or hits the rocks?
The government reported a 0.4 percent drop in March retail sales. Jeffrey Rosen, chief economist with Briefing.com, says the next report won't be any better.
"The underlying trends point toward another month of declining sales. We already saw from the motor vehicle manufacturers that vehicles sales slipped by 2.6 percent in April," he says.
Rosen reminds that the jobs report released earlier this month showed a decline in wages, hurting consumers' ability to spend. He's looking for a decline of 0.5 percent or more in retail sales, close to what others are expecting.
- April retail sales: Monday 8:30 a.m. Eastern
- Housing starts: Thursday 8:30 a.m. Eastern
One wild card involves the recent drop in gasoline prices, something most of us have welcomed. While consumers get a break from falling gas prices, they show up as weaker sales in the dollar-denominated report. On the positive side, IHS Global Insight says if you factor out autos and gas, retail sales were probably up 0.4 percent in April.
Getting the statistics right also involves the impact of Easter sales, the timing of which vary from year to year.
"An earlier-than-usual Easter this year may have caused further havoc in the seasonal adjustment process," says economist Lynn Reaser with California's Point Loma Nazarene University.
"Higher employment, climbing home prices, and rising stock prices are all now supporting retail sales -- although the performance is likely to be uneven," she adds.
Chain store sales weren't too bad
One narrow preview of the government report is monthly chain store sales, out last week. The International Council of Shopping Centers reported a rise of 2.7 percent, compared to a year earlier.
The trade group's chief economist, Mike Niemira says, "Definitely the consumer is hanging in better than expected." Niemira also says the surging stock market, the improving housing market and rising home prices are helping.
Housing no longer a drag
The housing market is now adding to U.S. growth, in contrast to the dramatically negative influence linked to the Great Recession. The difference should be underscored with the release of April housing starts data later in the week.
John Canally, chief economist with Boston-based LPL Financial, notes "we're right in the heart of the spring selling season, and home prices are accelerating again." He says "housing is making a contribution to gross domestic product (growth), which it hasn't done since 2005 and 2006."
So where are we?
Canally says it will be hard to maintain the 2.5 percent growth rate reported in the United States for the first quarter of the year, in part because of the eventual negative impact of the sequester.
He says, "2 percent growth for the year still looks like the best bet."
That is not enough to substantially drive down the unemployment rate, despite better-than-expected hiring numbers and declining new claims for unemployment benefits. The subpar recovery story drags on, it appears.
This week in business history: Oscars anniversary
On May 16, 1929, the first Academy Awards ceremony was held at the Hollywood Roosevelt Hotel. Just 270 people attended and tickets were $5. Unlike the modern-day drama involving surprising nominees as well as the audience, the winners had been notified three months in advance. The policy was changed the following year, adding the element of surprise to the ceremony script.
How far has the industry come since then?
Just counting box office results alone, the Motion Picture Association of America says the total "for all films released in each country around the world reached $34.7 billion in 2012." Next year's ceremony will be the 86th for the Academy Awards.
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