Economy Watch: Retail Sales Up Modestly in June
- Jul 16, 2014
Retail sales were up 0.2 percent in June compared with May, according to the Census Bureau on Tuesday, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes. Total sales for the month came in at $439.9 billion, up 4.3 percent from June 2013.
Though the gain was slightly weak month-over-month—down 0.3 percent—car and car part sales are still strong, up 6.4 percent for the year. Health and personal care stores have seen a sales increase of 7.9 percent since last June, and food service and drinking places experienced a 5.6 percent rise over the same period. Non-store sales —that is Internet—continued their growth at 8.1 percent year-over-year in June.
There were few retail sales losers year-over-year in June. Sporting goods, hobby, book and music stores lost 2 percent of their sales since last year, and department stores experienced a slight decline of 0.1 percent over the year. Month-over-month, there were declines in the aforementioned car sales, as well as building material stores, furniture stores and food service and drinking places.
Yellen calls recovery incomplete
In her semiannual monetary policy report to Congress, Federal Reserve Chair Janet Yellen intimated that interest rates weren’t going to move for an unspecified while, since the recovery of the U.S. economy is “not yet complete.” Despite various improvements, too many people remain unemployed for the economy to be truly healthy. She added that inflation remains below the Fed’s longer-run objective, and not all of the “necessary financial reform initiatives have been completed.”
The decline in U.S. GDP was probably an aberration, the chair said, but it’s still causing the central bank to downgrade its growth projections for the year. The Fed expects that economic activity will expand at a moderate pace over the next several years, supported by “accommodative monetary policy, a waning drag from fiscal policy, the lagged effects of higher home prices, and strengthening foreign growth.” The employment market will also continue to improve.
Yellen asserted that the Fed could raise interest rates, but it isn’t going to yet. “The committee remains confident that it has the tools it needs to raise short-term interest rates when the time is right and to achieve the desired level of short-term interest rates thereafter, even with the Federal Reserve’s elevated balance sheet,” Yellen says. Talking about interest rate increases “are a matter of prudent planning and do not imply any imminent change in the stance of monetary policy.”
CBO foresees rise in public debt
The Congressional Budget Office released a report on Tuesday predicting that the U.S. public debt would—extrapolating current conditions, never a sure thing—be equal to 78 percent of GDP by 2024. Currently, public debt is about 74 percent of GDP. The CBO further predicted that debt would rise to exceed GDP by 2039 (that is, more than 100 percent). Federal deficits, which add to the overall debt year-by-year, have been improving, lately dropping below 3 percent of GDP, but the CBO doesn’t expect that trend to continue.
To give the 100 percent public debt number some context, it’s useful to know that most developed countries have high public debt compared with GDP, such as Germany (nearly 80 percent of German GDP), Canada (about 84 percent), France (nearly 90 percent), the U.K. (90 percent) and Japan—an extreme example—now about 214.3 percent. All of those debt levels are predicted to expand at least through 2019.
Wall Street had a mixed day on Tuesday, but was mostly down, with the Dow Jones Industrial Average eking out a gain of 5.26 points, or 0.03 percent. The S&P 500 declined 0.19 percent, while the Nasdaq was down 0.54 percent.