News on the economy was mixed on Friday morning, with the release of a mildly relieving Producer Price Index report(measuring the average change over time in selling prices received by domestic producers of goods and services) and a discouraging retail sales report for August. Stock markets initially fell on the reports, but stabilized by noon on Friday.
The price index for finished goods, a measure of the change in prices businesses pay, fell 0.9 percent in August after a 1.2 percent increase in July, according to the Bureau of Labor Statistics. The August decline was the biggest since October 2006.
Consumers’ spending on retail and food decreased 0.3 percent in August after a 0.5 monthly drop in July, according to the Commerce Department. Economists had been expecting an increase of 0.2 percent.
Retail sales probably fell for several reasons, economists said. For one, the fiscal stimulus checks that had bolstered consumer spending over the last few months ended in July. Consumers, squeezed by high energy prices and an ailing job market, are expected to reduce their spending for the rest of the year.
One concern is the jobless rate, which jumped to 6.1 percent in August, its highest level in five years, from 5.7 percent in July. The steady rise in unemployment is one that many economists associate with recession.
Dropping gas prices seem to have benefited consumers psychologically, at least, even if these declines are not being reflected in retail sales. The preliminary September consumer sentiment index, released by Reuters and the University of Michigan Friday morning, showed the biggest monthly improvement in American consumers’ views of the economy since January 2004.
My opinion: This is not the ideal situation going into the fall season. The fall retail outlook has been speculative for the past several months and the August numbers play out according to projections. August is usually a very good month for general retailers because of back-to-school-related sales.
Bottom line: This is NOT the time for head-in-the-sand tactics. Review some of my earlier posts regarding retail strategies in the face of a down economy (click here) and be very proactive with fall promotions. Give Ms. Consumer something to be excited about this fall. Sales of plants and other items for themed Fall displays in the home and landscape have been growing the past several years. Let’s keep the streak going.