Thursday, June 12, 2008

More fodder for the recession-or-not contest 

The Census reported today that retail sales were surprisingly strong in May. The April and March figures were also revised upwards. Michael Mandel doesn't believe the number, while the economists at Morgan Stanley believe it enough to swing their forecast for Q2 GDP growth from -0.2% to +0.5%. They write:
We doubt that the tax rebate checks had much impact on this report. Indeed, from an arithmetic standpoint, most of the upward adjustment to our [second quarter] estimates reflected the revisions to March and April � and, distribution of the checks did not even start until the end of April�.So where is all this spending coming from? We do not have a good answer to this question.
Well, it ain't Ricardian equivalence, Mankiw says. Growth of consumer spending has also spread to China, Ironman says, and also to visiting Europeans. Maybe globalization has a good side to it after all.

On the other side (again), Calculated Risk graphs that year-over-year real retail sales are still negative, extrapolating February-April price changes into May. I have no idea whether that is really justified. Probably better we address that next week when the price data for May come out.