Comment on U.S. Bureau of Census Retail Sales Report

Kathy Bostjancic, Director of Macroeconomic Analysis, The Conference Board

Weak Spending Power but Firmer Spending

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Jun 13, 2013, 09:12 ET

NEW YORK, June 13, 2013 /PRNewswire/ -- The following is a comment on U.S. Bureau of Census Retail Sales Report from Kathy Bostjancic, Director for Macroeconomic Analysis, The Conference Board:

Consumer spending is getting a boost from improving consumer confidence and a rebound in aggregate household net worth to a record level, surpassing the pre-recession peak recorded in Q3 2007. The positive wealth effect from rising equity and home prices helps supplement the still weak income gains generated by average workers. In May, average hourly wages only improved by a penny. While not all families have benefitted from the rise in net worth, the wealth effect is broadening as home prices have rapidly leaped higher this past year. Thus, despite weak income gains, it is not surprising that consumer discretionary spending (after necessities have been accounted for) has held up moderately well. A moderate pace of spending may continue until the economy improves enough to finally start to deliver more spending power from wage growth. Consumers seem to expect that this is coming.

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