Consumers Keeping Economy Afloat

If the U.S. economy manages to avoid a double-dip recession, which many economists thought was a foregone conclusion just a few short weeks ago, it may be thanks to the resilient U.S. consumer.

In the face of high unemployment and fear-inducing financial headlines, consumers are continuing to spend. The Commerce Department reports retail sales rose 0.5 percent in October. The rise was 0.6 percent if you exclude new car purchases.

“This was a very solid report that continues the now growing line of numbers that point to an economy on the upswing,” said economist Joel Naroff, of Naroff Economic Advisors, in Holland, Pa. “So far this year, retail sales are up nearly eight percent, a much better performance than anyone expected.”

Noting that consumer confidence numbers show consumers are worried about the economy, Naroff says the retail sales numbers provide a stark contract, and may be another reason to question whether the consumer confidence numbers are truly reflecting consumer views on economic conditions.

In October consumers bought more vehicles and spent more on sporting goods, health care products and at restaurants. While consumers have done a good job of driving the economy, Naroff says they still have work ahead of them.

“The consumer has to come through this holiday season if we are going to get back to more decent growth rates,” Naroff said. “The early readings are those households have hit the stores quite strongly.”