Weekly Market Insight | Retail Sales

Consumer spending is one of the hurdles still facing the economy as it struggles toward recovery. The nascent rebound in manufacturing—thanks to low inventories combined with a gradual increase in new orders—can only carry the economy so far. In recent years, consumer spending has accounted for about 70 percent of total gross domestic product, so without the participation of consumers, the hoped-for recovery could be short-lived or, at best, weak. The Census Bureau reported that total retail sales slipped by 0.1 percent in July despite strong vehicle sales related to the cash-for-clunkers program. Core retail sales, which exclude vehicles and gasoline, fell by 0.4 percent. On a year-over-year basis, total and core sales are down 8.3 and 4.6 percent, respectively (see chart). Disappointing back-to-school sales do not auger well for the all-important holiday shopping season. While some merchants are using the downturn as an opportunity to expand into better spaces at bargain rates, a broad-based recovery in leasing activity and retail sales is unlikely until employers start hiring again.
Source: Census Bureau, Grubb & Ellis