Saturday, March 14, 2009

Do Facts Matter?

If you ask anyone these days about how consumer spending and retail sales are doing, what answer do you get? If you watch the business news and the regular nightly news what do you hear? That consumers are frozen and have retrenched and are hanging on to every dollar. Is that true?

Lets begin with retail sales. December was weaker than previous Decembers but still not so bad. Then what happened? Did January see a collapse in retail sales? No! Retail sales rose 1.8 percent in January over December. That includes a significant slide in auto sales and is not inflated by price increases. In fact prices fell, so the a real quantities of sales increased more than 1.8 percent. What about February? Because auto sales collapsed, the overall retail sales declined (barely) by 0.1 percent. Wow! Is that a collapse? Overall, then, since December, retail sales are up nearly two percent and much, much higher than that, if auto sales are excluded.

What about consumption spending overall? You keep hearing that savings are rising dramatically while consumption spending is collapsing. Is that true? No, in fact, real consumption spending rose during the first two months of 2009 and for the quarter as a whole, as Barrons noted today, "this component of GDP (consumption expenditures) could make the first positive contribution to overall growth since the second quarter of last year." Is this what you hear when you listen to the news or to our new President?

Even better, preliminary data shows that inventories are declining dramatically. This suggests that new orders will, sooner rather than later, force positive feedback to production. Are you hearing this from the news media or the White House?

No doubt, real GDP will decline in the first quarter. There is no doubt about that. We are in a recession after all. But are things even remotely as bad as the President and the Congress and the media are telling us? Why doesn't the President speak more optimistically about this economy? Is President Obama cheerleading for the economy to collapse? Is this what he wants?

The actual facts are far, far better than what the press and the politicians are saying. But the fact have no agenda. They are simply the facts. Here they are: retail sales are up not down; consumption spending is up not down; bank lending is up not down, credit markets are improving not weakening; commercial banks are making huge profits not collapsing. President Obama, are you listening?