Moving Beyond Window Shopping: Retail Industry Activity Rises

August 23rd, 2011

Jonathan Dionisio

The retail industry is often one of the best reflectors of the status of the economy since consumer spending makes up about 70 percent of the country’s economic growth. As consumers continue to buy products, both necessity and luxury, businesses have the opportunity to grow. Other industries, such as the wholesale industry and manufacturing industry, benefit from this spending as well. Taking the results of July’s retail sales, I believe that the retail industry is off to a good start for the second quarter.

Citing data from the Commerce Department, retail sales rose 0.5 percent, a significant improvement over last May when sales slipped 0.2 percent. The increase in sales was felt by most business segments. Electronics and appliances grew 1.4%. Furniture and apparel sales rose 0.5%. Auto sales grew 0.4%.

On the other hand, wealthier consumers who have stronger spending power continue to drive sales for high-end brands. Spending on luxury goods rose 11.6% in July compared with a year earlier, the tenth consecutive month of growth in that category, according to data released Thursday by MasterCard Advisor’s SpendingPulse.

“Don’t write off the American consumer or economy just yet,” said Sal Guatieri, senior economist at BMO Capital Markets in an interview with New York Times. “The solid July retail sales report should help allay recession fears.” William Dudley, President of the Federal Reserve Bank of New York said that we shouldn’t be worried of a double dip recession scenario. Although “the risks have risen”, he still expects the economy to grow faster over the second half of this year than in the first six months.

Despite low consumer sentiments, as seen in the latest Thomson Reuters/University of Michigan’s survey, the public continues to move the economy through everyday purchases. With this, Mark Vitner, economist at Wells Fargo, believes the July retail results signals a strong start for third-quarter consumer spending growth.

This reinforces my belief that buying a retail business for sale is a smart choice. Aside from the flourishing manufacturing and automobile industry, retail has also continued to show signs of growth potential. Consumers will not stop buying. They may become more cautious in their spending habits, but they will continue to pour money into the economy.

Sources:
http://www.nytimes.com/2011/08/18/business/daily-stock-market-activity.html
http://www.nytimes.com/2011/08/13/business/economy/retail-sales-rise-but-consumer-sentiment-hits-30-year-low.html
http://money.cnn.com/2011/08/12/news/economy/retail_sales_july/index.htm
http://online.wsj.com/article/SB10001424053111904006104576503960525277424.html
http://www.nytimes.com/aponline/2011/08/12/business/AP-US-Retail-Sales.htm

http://www.census.gov/retail/marts/www/marts_current.pdf