By John S. McClenahen With U.S. retail sales posting 0.8% growth to $306.2 billion in August, compared with their substantially larger 1.1% gain in July, it seems strange to be talking about continued strength in consumer spending. But that's exactly ...
ByJohn S. McClenahen With U.S. retail sales posting 0.8% growth to $306.2 billion in August, compared with their substantially larger 1.1% gain in July, it seems strange to be talking about continued strength in consumer spending. But that's exactly what several economists are saying in the wake of the U.S. Commerce Department's Sept. 13 report on August sales by retail stores and food-service outlets. The best explanation seems to be that most economists anticipated that with flagging consumer confidence in the economy last month's increase would have been much lower -- only 0.3% or 0.4%. "Given the strength of consumer spending, there is an upside risk to our estimate that third-quarter GDP will rise at a 3.5% rate," states a bullish Bruce Steinberg, chief economist at Merrill Lynch & Co., New York. "It could easily be 4%." Maury Harris, chief U.S. economist at UBS Warburg LLC, also in New York, isn't willing yet to raise his forecast for a third-quarter GDP rate of rise of 2.5%. However, Harris does plan to review his GDP prediction this week, once he's seen July data on inventories and foreign trade. Meanwhile, inflation isn't exactly threatening the U.S. economy. The U.S. Labor Department's closely watched Producer Price Index (PPI) for finished goods showed no change in August. The index had fallen 0.2% in July and risen 0.1% in June. The so-called core PPI -- which excludes often-volatile price changes for food and fuel -- fell 0.1% in August. "There is simply no visible inflation in the U.S. economy," says Merrill Lynch's Steinberg.
