Store sales and consumer confidence often summarize the current state of the economy. A common assumption is that an increase in one leads to the exact same within the other. A decrease would work the exact same way also. But independent accounts introduced Friday show a strong 2010 store revenue trend accompanied by declining consumer confidence in January. This makes one wonder if all the payday loans they took out for the holidays were really worth it.

In 2010, there were greater retail sales

the Commerce Department explains that there was a greater increase in retail sales within the United States in 2010 than there has been since 1999. From 2009 to 2010, U.S. retail sales increased 6.8 %, the strongest growth since an 8.2 % surge in 1999. December retail sales rose for the sixth month in a row, increasing 0.6 % to $380.9 billion after rising 0.8 percent in November. It wasn’t expected that there were going to be such great gains in December because of harsh winter weather although there was a good purchasing season. Department store sales dropped 1.9 %, the steepest decline in 2 yrs. There was a 2.9 percent increase of sales within the month though. This is why the month ended up gaining.

Unreliable consumer confidence index

The strong sales haven’t changed the consumer confidence though. In Jan. it went down still. The Thomson Reuters/University of Michigan consumer confidence index for Jan. fell to 72.7 from 74.5 in Dec.. A Bloomberg News survey of economists predicted a bump in the consumer confidence index to 75.5. Analysts are saying rising gas and energy prices, combined with the snail’s pace of job creation are to blame. The labor market won’t be able to recuperate for quite a while right now after unemployment fell to 9.4 percent in Dec.. Higher gas prices increased sales at gas stations 1.6 percent last month. Energy prices rose 4.6 % in Dec..

Much of the consumer data spending looking good

Consumer confidence has dropped so far this month, but economists say the consumer expectations index is a more accurate economic indicator. The consumer expectations index looks at how people feel about what their finances will look like six months down the road. It is at 68.2 right now, the Commerce Department reports. Since June, that is the highest it has been. The strengthening consumer expectations index bodes well for consumer spending, the lion’s share of U.S. economic output. The sales trends make it seem like there could be an economic recovery. It might not happen though, all the reports have been conflicting.

Citations

Bloomberg

bloomberg.com/news/2011-01-14/u-s-consumer-confidence-unexpectedly-declines-on-jobless-rate-fuel-costs.html

Financial Times

ft.com/cms/s/0/31407e40-1fe7-11e0-b458-00144feab49a.html?ftcamp=rss#axzz1B1dxfKkv

Wall Street Journal

online.wsj.com/article/SB10001424052748703959104576081602659693450.html

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