THANK GOODNESS FOR BOTOX...:

May's Signs of Strength: A stronger-than-expected surge in retail sales and a spike in import prices will keep things tricky for the Fed (Michael Englund and Rick MacDonald, 6/14/07, Business Week)

Retail sales rebounded a solid 1.4% in May. This followed an upwardly revised 0.1% decrease in April from a 0.2% fall initially. The ex-auto component rose 1.3% following a revised 0.1% increase in April (flat previously). Strength was broad-based, but rising gas prices continued to provide a boost, with gas station sales up 3.8%. A 2.7% rebound in clothing sales also boosted spending. Building materials climbed 2.1%, and food and beverage sales were up 0.3%.

The May sales data were certainly strong, though the auto and building material gains won't translate to the consumption figures in the GDP accounts. And the 2% second-quarter real (i.e., adjusted for inflation) consumption gain we project is still quite respectable, given the outsized consumption increases over the prior two quarters of 4.4% in the first quarter and 4.2% in the 2006 fourth quarter. Those prior gains left the strongest two-quarter combo since the middle two quarters of 2003.

The moderation in real spending growth in the second quarter must be seen as a temporary hit from the gasoline price surge, with continued strength in nominal spending. This strength in sales over the last half-year is the primary driver for the end to the inventory downdraft at the start of the second quarter, which explains the likely stronger growth path for GDP in the second quarter and beyond. We will continue to assume an upward adjustment in the first-quarter GDP gain to 0.9% from 0.6%, with the boost from net exports and inventories, alongside a downward construction revision.

...else how would economists look so continually surprised at America's uninterrupted economic growth over the last quarter century.

Posted by Orrin Judd at June 14, 2007 7:57 AM