Friday, November 14, 2008

Retail Sales Collapse Too

U.S. retail sales fell 2.8% in October compared to September, the biggest monthly decline ever during the 16 years this retail sales statistics have been compiled. Sales fell the most for cars and gasoline, but dropped for most other things as well.

The drop in consumer spending is ultimately inevitable and sound as Americans needs to save more. But to the extent it is being replaced by government purchases, this shift is not so sound. And this news certainly confirms my view that the fourth quarter will see a drop in GDP of more than 4%.


Blogger Wille said...

4% in one quarter? That is pretty grim, the UK economy shrank about 3% during the whole 90'ies recession, and that is considered brutal..

What do you think will be the fallout of numbers like that? Probably another > 10% fall week on the world stock markets..

Methinks it's time to cash in my pounds and buy gold..

7:10 PM  
Blogger stefankarlsson said...

Actually, 4% is not as bad as it sounds. You see in America quarterly changes are expressed in annualized terms, which is to say the change in one year that would happen if the current quarterly growth cotinues for three more quarters. This means that if GDP falls by 1% compared to the previous quarter, this will be expressed as a 4% decline. When I wrote about a 4% decline I meant, 4% according to the standard American way of expressing it. Which is to say, what I meant was that U.S. GDP would fall by more than 1% in the European way of expressing it, in non-annualized terms.

8:52 PM  

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