Steve Blitz Morning Notes

Retail sales are not as negative as the headline, but they were also never as positive as April’s headline. Core retail sales, sales without spending for autos, building materials and gasoline, was up 0.10% in May after falling 0.22% in April. Discretionary retail sales, purchases of items people don’t have to buy, fell 0.05% in May after falling 0.26% in April. Positive and negative volatility in several spending categories can be tied to the boom in house buying in April. Bottom line, consumers only spend when they have to and they don’t spend much -- spending is not the recreational activity it was prior to the recession. Unemployment is still at extraordinary high levels, there is no equity to take out of homes, and the stock market has proven of late to be an unsteady source of wealth to fund purchases. This economy is still a long way from consumers picking up the growth baton from manufacturers. And manufacturers are facing renewed headwinds of their own, thanks to the cheapening of European exports into Asia. Second half GDP growth is not going to surprise to the upside.