The Wall Street Journal reported that "a comforting reading on consumer spending eased some worry about the possibility of a recession and inspired a shopping spree in tech shares." USA Today's headline told readers that "surprise gain in retail sales drives stocks higher." What was the good news that sent the markets soaring? The Commerce Department reported that retail sales rose by 0.3 percent from December to January. Well, this is not exactly great, but it was better than expected. But those who care about details would have noticed that higher food and gasoline sales accounted for almost 80 percent of even this modest growth. Pulling out spending in these two areas (which was most likely driven by higher prices, not increased demand), retail sales rose by a grand total of 0.07 percent in December, or 0.8 percent on annual basis. Still cheering? Let's add in the December numbers. Over the last two months, retail sales, excluding food and beverages and gasoline, are down by 0.6 percent. This is a 3.6 percent annual rate of decline. (Of course this is in nominal dollars, these numbers are not adjusted for inflation.) I wonder what is seen as bad news on Wall Street.
--Dean Baker
