The Year of the Goat is a hot topic among retailers and those who celebrate the Chinese New Year. Experts in Chinese astrology say that the outlook for finance and wealth is favorable but exercise caution as there will continue to be volatile political situations causing economic activity and prices to fluctuate.
The indicators outlined in February’s Monthly Economic Review suggest the same outlook. The economy is recovering but continues to be characterized by fits and starts and highs and lows; while I remain optimistic about overall growth for the retail industry in 2015, recently released economic data have come in weaker than expected — puzzling, as the latter half of 2014 showed rapid growth in several areas.
Retail sales came in January lower than expected, but it remains unclear if it is due to seasonal issues like the weather or weaker consumer demand. Consumer sentiment remains strong but continues to fluctuate, reflecting a skittish American consumer. On the other hand, January registered another solid gain in payrolls, and if the rebound in wages isn’t a one-off wonder, there is much to look forward to.
This month’s full report includes these highlights:
The extra money coming from lower gas prices may be going toward savings, paying off debt or spending on services rather than retail goods and merchandise.
Retail Sales and Consumer Sentiment
The softening in retail sales and consumer sentiment poses some downside risk for consumer spending in the first quarter of 2015.
E-commerce sales continued to grow but the pace of growth slowed from 3.6 percent in the previous quarter to 2.3 percent in the fourth quarter.
Gross Domestic Product and Unemployment
GDP is expected to increase 2.7 percent in the first quarter of 2015 and the unemployment rate is set to decrease from 5.7 to 5.6 percent.
Attractive mortgage rates and easier credit conditions along with stronger job and income growth are reinforcing expected growth in the housing market in 2015.
As the labor market continues to expand, the unemployment rate should drop, enabling wage growth to slowly begin to increase. Wages should pick up between 2.5 and 3 percent on an annual rate in late 2015 and early 2016.
Retail Jobs and Openings
Total retail employment across all industry segments increased 45,900 to 15.6 million in January. There were 434,000 job openings in the retail industry on the last business day of December.
Personal Income and Spending
The wage and salary component of personal income improved a meager 0.1 percent in December and seems to be at odds with the strong December employment report. Nonetheless, wage growth is stronger than last year and is trending modestly higher despite December’s weak growth.
Chicago Fed National Activity Index
The index is well above zero, indicating the economy is growing above its historical trend; some inflationary pressure in the coming months is expected.