Setback In U.S. Retail Sales Temporary Blip


Retail_Sales_Dec14

Even though U.S. retail sales in December were down slightly from November, the U.S. economy continues to gain momentum.  While some are suggesting that this represents a chink in the armor in the reemergence of the U.S. economy, this is likely a temporary setback and one should fully expect our U.S. retail sales to continue its resurgence through the first quarter.

Here are reasons for U.S. optimism:

  1. Low gas prices should continue for the foreseeable future.
  2. Consumer confidence will continue to rise as they start to believe low gas prices are permanent.
  3. While energy and commodity sectors will struggle, the expected rise in consumer spending should offset those declines.
  4. As consumers believe low gas prices will be more permanent, they will loosen their wallets more in the future.

Here are reasons for concern:

  1. Energy and commodities sectors will take a hit and possibly affect banking and access to credit.
  2. Countries outside the U.S. are experiencing economic decline, which will impact U.S. exporters.

Optimism outweighs concerns due to:

  1. U.S. economic activity is strongly weighted toward consumer spending with it representing approximately 70 percent of all economic activity.
  2. Lower energy and commodity costs will make it more attractive for retailers to expand operations and create jobs.

Despite these potential threats, the strength of the U.S. consumer should lead the U.S. retail sales to rebound at a healthy rate in the first quarter of 2015.

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