Retail spending in the US rose 0.5% in May, the Census Bureau reports–a bit better than economists expected. The gain marks a sharp downshift from April’s 1.3% bounce. But April’s unusually strong advance isn’t sustainable and so it’s no great tragedy that today’s report is weaker by comparison. Overall, looking at the last two monthly increases suggests that there’s still a healthy glow for retail sales. A less-encouraging profile emerges, however, when we focus on the year-over-year trend, which is probably more reliable for analyzing the appetite for spending.
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No one would characterize GDP forecasting as easy. Some might call it worthless. But to the extent that we crunch these numbers, it’s useful to note that there are many ways to slice and dice. Not surprisingly, results vary–sometimes by a lot. Among the various knives in this drawer is one with the potential to minimize the noise via modeling GDP changes on a year-over-year basis. It’s flawed, of course, like every other effort at divining the future. But the underlying methodology has a certain appeal, as I’ll discuss. And maybe, just maybe, its flaws are less egregious vs. the usual suspects that attract so much attention in the GDP prediction game.
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