Economic Populist Commentary

Economic commentary by a pro-capitalist, economic populist. Demand-Side Economic theory. Consists of author's economic views. Questions & comments appreciated. Dissenting views are VERY welcome and encouraged. Main "agenda" is crafting and advocacy of a "populist" economic agenda. A secondary goal is prevention of an economic Armageddon. Encouraging open discussion of US economy.

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Location: Southern California, California, United States

The author is a physician by profession, and a "student economist" by necessity. The current status of our economy necessitates the latter. The intent of this blog is to explain and discuss economics in layman terms. It is designed to promote thought and discussion. It is written by a layman. Comments and critiques of these theories and letters are welcome and ENCOURAGED. Dissenting comments are also WELCOME! They form the basis for discussion.

Thursday, August 17, 2006





RECESSION LOOMING?


Retail Sales Decline: Harbinger of Recession?

The total nominal increase in July 2006 Retail Sales of $368.405 billion was 3.9% from July 2005's $354.414 billion. However, adjusting for inflation using the Bureau of Labor Statistics Consumer Price Index increase of 4.3%, this reduces the "real" Retail Sales change to -0.4%. However, the figures are even worse if gasoline station sales are subtracted. Subtracting July 2006's $43.918 billion in gasoline sales from the total nominal Retail Sales gives $327 billion. Subtracting July 2005's gasoline station sales from the total nominal Retail Sales (from July 2005) gives $319.53 billion. The difference between the July 2006's retail sales (ex. gasoline station) and July 2005's retail sales is only 2.3% in nominal (non-inflation-adjusted) dollars. Adjusting for inflation using the CPI increase of 4.3% puts the total at a -2.0%. In other words, excluding gasoline station sales, inflation-adjusted Retail Sales declined 2.0% from July of 2005.

This can be seen from the Retail Sales chart copied from the U.S. Bureau of Economic Analysis report on Retail Sales

General Merchandise Sales, which make up the biggest component of Retail Sales, showed a nominal increase in dollar sales of 4.3%. (underlined in blue on the chart above.) Again, this is exactly the same as the increase in the Consumer Price Index of 4.3%. Thus, the real change in General Merchandise Sales since July of 2005 is 0.0%. In other words, there has been NO growth in General Merchandise Sales since July of 2005.


The declining inflation-adjusted Retail Sales numbers are an ominous sign for the economy. They're even more concerning when gasoline station sales figures are not included, which leaves the remaining total for Retail Sales at 2% less than the previous July. Even with increased borrowing, consumers spending is declining. Since consumer spending is 70% of GDP growth, it makes further GDP growth difficult, if not impossible. With consumer borrowing ability expected to fall even further, consumer spending will likely decline further as well. Real wages have continued their steady decline since December 2002. Median real family income has declined every year since 1999. With decreasing consumer spending and decreasing consumer demand, labor demand can be expected to decline even further. The declining labor demand will result in further declines in both wages and employment, reducing consumer spending power even further.

Several noteworthy economists are suggesting a recession is on the way. Paul Krugman has discussed this in his most recent article titled Intimations of Recession. Economist Nouriel Roubini, former member of Clinton's Council of Economic Advisors, has put the likelihood of Recession at 70% by the end of 2006. Another article from the Daily Reckoning has also laid out a strong case for an impending recession. All of these sources have provided a considerable amount of evidence to support their predictions. It appears that our "faith-based" economy is running out of steam. It can no longer be kept afloat by the hot air from the Housing Bubble and the alternate reality creation of the NeoCon-Artist spin machine.


EconomicPopulistForum

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Anonymous Stefan C Kosikowski said...

Hello Sir,

I admit economics is not my strong suit, I am an electrical engineer, but I was curious to your thoughts on Land Value [based] Taxation?

More info can be found at Henry George dot org.

http://www.henrygeorge.org/

It almost sounds to good to be true, so I was hoping you could direct me towards any flaws or weak points in this approach.

Land Value Taxation is going to be discussed at my [Reading PA] City Council in January next year.

Of course, I am leaving you my web site so you can explore where I am coming from.

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Blogger unlawflcombatnt said...

Steven,

Could you give me a little more information as to where on the Henry George site I can find the part covering "Land Value Taxation"?

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