It’s the first time retail sales have fallen for three straight months since the end of 2008 and it’s just one more indication that the economy we have today is going to be the same, or very similar, to what we see on election day.
Americans reined in their spending for the third straight month in June, fueling fears that the economy is stalling after gathering steam early this year.
Retail sales dropped 0.5% in June, the government said Monday, falling short of the 0.2% rise that most economists were expecting. Retail sales haven’t fallen three months in a row since 2008. April’s figures were revised down.
Stocks dropped on the disappointing news. The Dow Jones Industrial Average slipped 43 points, or 0.3%, to 12,735, while prices of U.S. Treasury bonds rose as investors sought a safe place for their cash.
une’s sales were hampered by the recent drop in the price of oil, which reduces the dollar value of sales at gasoline stations. Normally, that is a good thing:
Falling prices at the pump should help the economy by putting more cash in consumers’ wallets and encouraging spending. Retail sales are an important part of overall consumer spending, which fuels two-thirds of America’s economy.
JP Morgan’s closely watched Forecast had further bad news for Obama, (via Jim Pethokoukis):
This morning we lowered our tracking of Q2 GDP growth from 1.7% to 1.4%. For some time now we have noted that our Q3 GDP call — which was already below consensus at 2.0% — had risks that were skewed to the downside.
After the latest round of data we have decided to lower our projection for Q3 to 1.5%. The strength in inventories reported this morning suggests that businesses may have got caught offsides when final demand weakened this past spring. That inventory build should weigh on production growth in the third quarter as already-cautious businesses seek to work down stockpiles. Added to this downside, the weakness in June real consumer spending will make the arithmetic for Q3 consumption a little more challenging.
Finally, the decline in gasoline prices — which had been seen as an important support to the economy — has partly reversed itself in recent weeks, thereby lessening the impetus to growth from that source. For 2012 as a whole, we are now looking for growth of around 1.7% on a Q4/Q4 basis, about the same as last year and 0.2%-point below our tracking last week. On a year-ago basis real GDP has been growing at a below-trend pace since early last year. If our forecast is anywhere near correct, that pattern will persist for at least another year, and perhaps even longer.
Pethokoukis gives us the bottom line:
Basically, this is a forecast for stagnation for the rest of this year and through 2013. Also note that the forecast sees monthly job growth at just 100,000 a month in the third quarter, with the unemployment rate averaging 8.2%.
The worst recovery since the Great Depression shows no signs of improving, and Team Obama should expect no last-minute lift from it.
Obama may not need a last minute miracle from the economy to win. He’s doing a damn fine job of making Bain Capital into the most infamous company since IG Farben and unless Romney can get the conversation back to these dismal economic numbers, Obama is going to have an unlikely victory.
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