The U.S. Commerce Department reports some encouraging news among all the gloom and doom: retail sales including food rose 0.6% in June from the previous month, a performance that was better than anticipated.
Still, although sales increased month over month to $342.1 billion, they were 9% below June 2008 levels, according to the Census Bureau.
Motor vehicles and parts made a strong showing, increasing to $57 billion in sales from $55.7 billion in May, but those figures represented a 14.1% decrease from June 2008 sales levels of $66.4 billion.
Gasoline station sales rose slightly from May to June, to $29.9 billion, but they were down 31.6% from June of last year, when sales registered $43.8 billion.
Are the gains substantive?
The apparent monthly growth in sales is not as substantive as it seems at first glance, says Suzanne Mulvee, senior real estate economist at Boston-based Property and Portfolio Research. "If you take the gas and the cars out, it was .2% negative."
The car sales may have risen as a result of stimulus plans from Washington, D.C. and Detroit, says Mulvee. "There's a heck of a lot of incentives out there for automobiles right now." So with regard to the higher auto sales, "I'm skeptical of what that means for the broader economy," she says.
Moreover, one month's statistics don't indicate a pattern, Mulvee cautions. "You can't look at one month's numbers and say this is good for the economy or bad for the economy." Setting aside food and gas, she studies sales of other products, such as clothing, general merchandise and building materials.
According to the Census Bureau, the building materials and garden supplies industry continued its slump, recording $24 billion in June sales, compared with $24.3 billion in May, and down from $27.6 billion in June 2008. Also reflecting the stalled home sales market, furniture and home furnishings recorded $7.8 billion in June sales, down slightly from May, and well below the $8.9 billion reached a year earlier.
Clothing sales notched up slightly from May to $17.4 billion in June, but that was still lower than the $18.5 billion in sales recorded in the same period a year earlier.
"Inflation adjusted, we're back to 2005 as far as spending levels in the economy," Mulvee says. As for whether the economy has hit bottom, she believes that it's at least nearing the bottom.
Before recovery can occur, the current deflationary spiral must be stopped, she says. When financial markets become healthy and lending becomes more widespread, that should boost economic expansion. Consumer sales and the performance of the financial markets are intertwined, Mulvee adds, which is why the federal government is making such an effort to stimulate both the financial markets and consumption.
Consumers alone can't spur the economy, she says. "The consumer can only do so much when the financial markets around them are broken."
The key word is 'jobs'
The main driver for a more powerful increase in consumer spending and economic recovery is the unemployment rate, says Albert Saiz, assistant professor of real estate at The Wharton School of the University of Pennsylvania.
"There's good news, it's undeniable," in the monthly uptick in retail sales. However, it's going to take a year or so longer for any recovery to begin to affect commercial real estate leases, Saiz notes. "We're in for a year at least of relative hardship."
Several areas of the country have been so hard hit by recession that its ravages are clearly visible, says Saiz, a former economist with the Federal Reserve Bank of Philadelphia. California, Florida, Nevada and Arizona in particular have suffered severely from the economic downturn.
So has Michigan, but its troubles may have more to do with a long-term trend related to dwindling jobs and population in the Rust Belt, the economist says. The recession only worsened the trend that was already in progress.
During a recent trip to Florida, Saiz noted the empty spaces in malls where many stores had closed, driving up retail vacancy rates. "The situation is pretty bad. You've got so many places going dark."
Although national recovery will take a year or two, over the long haul, he's optimistic that states in the South and West, in particular, will work themselves out of the doldrums. California has a strong immigrant population driving consumer demand, and it has industries such as technology to spur growth, he says.
Although it will take time, the commercial real estate industry, including the retail sector, eventually will regain strength, the economist says. "I think it will recover. I don't underestimate the willingness of the American consumer to spend money."