Retail sales advanced a tiny 0.7% October 28 through December 24. A year ago, sales grew by 2% in the same period.
Hurricane Sandy may have been partially to blame. But the main reason reason lies deeper: a looming recession, triggered by the fiscal cliff. Taxes are about to rise in the United States.
Meanwhile Japan and Europe are in a recession.
Consumer confidence is now at a five-month low.
Sales in the northeast contracted by about 1.4%. Sales in the mid-Atlantic fell by almost 4%. This was probably due to Sandy. The hurricane initially prompted the standard nonsense about a Keynesian shot in the arm. People would have to spend money to rebuild and repair. That was a variation of Bastiat’s broken window fallacy. It was wrong in 1850, and it’s wrong today.
The economy is sagging. But the media do not want to admit this. So, one source blamed the Newtown shootings. “The Newtown massacre, psychologically I think, spread through the country. This event was not isolated in the Northeast. It slammed the consumer with a lot of sobriety and made us think about what is happening in this world we live in, particularly around the holidays, when things are supposed to be wonderful and peaceful.”
The sluggish economy is not showing signs of increased productivity. Customers are not yet in anything like panic mode, but the yellow light is visible. They are on the sidelines. They are waiting to see what will happen early in 2013. They want to see how far over the fiscal cliff the economy will fall.