The New York Times: “Tax Checks Yield Surprising Growth in Retail Sales”
Retail sales grew 1.0% in May, and excluding auto sales, grew 1.2%. Usually Economists refer the ex-auto number as indicating strength or weakness in the sales statistics because auto sales are very volatile, with big shifts each month. The main drivers of the retail sales figures was growth in sales at gasoline stations (to be expected), but better yet, growing strength in auto sales, clothing sales, and department store sales. Overall, it is a good report.
The uptick in clothing and department sales is particularly encouraging because the rebate checks are going to purchases other than gas and food. Forecasters were expecting only a minimal (if any) boost from the rebate checks and clearly understating the potential benefit of the stimulus program. Going forward, expect a continued upward trend in retail sales that will drive economic growth over the next few months and keep the economy out of a recession.
On the political front, according to the Wall Street Journal/NBC poll, Obama has a narrow lead over McCain: 47% to 41%. John McCain should get a short-term boost from the retail sales numbers. The Bush-approved rebate checks stimulus is certainly helping the economy get through what would have been a very rough economic patch, and the trend is likely to continue through September. Rising food and energy costs are not eroding the stimulus from the rebate checks, and it is unlikely that they will over the next 6 months.
Each month that the economy continues to expand is another month that Obama cannot claim that the Economy is in desperate need of change. As the economy improves over the next few months, many voters will migrate toward the McCain side of the arena.