Retail sales beat expectations, but so what?

Retail sales were up two tenths of a percent in January driven by spending on cars, clothing and online merchandise. It’s not a spectacular increase, and that’s probably because consumers aren’t sure low gas prices will endure. Economist Dennis Hoffman comments.

Kimberly Adams interviewed Dennis Hoffman, director of the L. William Seidman Research Institute at the W. P. Carey School, about January’s report on consumer spending and whether the Fed will interpret the increase as evidence that the economy is improving. From Marketplace, February 12, 2016:

“The challenge that consumers have is believing that the gas price reduction will stick around for a while,” said Dennis Hoffman, who teaches at the W. P. Carey School of Business at Arizona State University. “They don’t want to make major consumer durable purchases based on a short-term downward spike on gas prices.”

But a boost in retail sales won’t be enough to convince the U.S. Federal Reserve the economy is firmly back on track. Policymakers will be looking at several more data dumps scheduled between now and the next Federal Open Market Committee meeting in March.

“So what are they going to be watching,” Hoffman said, “is primarily labor market pressures, price pressures, another round of retail sales data, another employment report and they’re going to be looking at those closely."

About Dennis Hoffman