Where’s the retail bump with gases prices so low?
Despite the downward trend of gases prices why haven’t we seen a commiserate increase in retail sales? The most recent report on retail sales indicates a weakening of the retail sector. Analysts have offered a myriad of opinions on why retail sales are soft. These are a few of the most common reasons given:
– Under employment: People have taken lower paying jobs
– Obama care: The implementation of Obama care has caused a dramatic spike in insurance costs
– Savings: There has been a significant increase saving rate in this country.
– Student debt: Millenials are important factor in retail sales and they are burdened with substantial student loans.
It’s fair to say that all of these have some effect on retail sales but here a few other factors that should be considered.
– Gas prices: Gasoline sales are part of the retail sales numbers. Obviously when gas prices decline their contribution to the retail sales number declines
– Before the economic crisis retail sales experienced double digit increases as did the expansion of retail outlets. People were using the equity in their homes to finance the spending spree. The recession and ultimate collapse of the housing market brought this growth trend to an abrupt end.
– The hangover effect: After the “Great Depression” it took nearly a decade for consumer confidence to rebound and people to resume their old spending habits. We are seeing the same process happening now during the slow recovery from “The Great Recession”. Consumers are in fact saving more and being more cautious which is only natural after a financial crisis. Maybe one the lessons is that retailers should take a careful approach to opening new stores as can be attested to by the recent announcements of store closures.
There’s always a rush to judgment to provide quick analysis to economic numbers, which usually tend to be an over simplification. Consumer confidence is a main driver of retail sales and that’s always tricky to predict. Retailers should be less concerned about what pundits are saying and listen to their customers. That’s where you’ll get the “unvarnished truth”.