PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Economic Update: Consumer Good News

By at 14 September, 2019, 8:51 am

by Raymond J. Keating-

Economic data on inflation and retail sales point to good news for and from consumers.

First, on September 12, the Bureau of Labor Statistics reported that the Consumer Price Index increased at a mere 0.1 percent in August. And over the past year, CPI inflation only ran at 1.7 percent. Low inflation, of course, is good news for consumers in maintaining the purchasing power of their dollars, as well as being good news for investors. Low inflation limits the inflation tax on investments and reduces uncertainty.

Second, a winning streak on retail sales growth was extended into August, according to the latest retail sales report out from the U.S. Census Bureau on September 13.

Retail and food services sales grew by 0.4 percent in August, which followed on growth in July being revised up from +0.7 percent to +0.8 percent. As noted in the following chart, after experiencing stagnation from November 2018 to may 2019, retail sales have been on an upward trend since.

Source: Federal Reserve Bank of St. Louis, FRED

Compared to a year earlier, retail and food services sales were up by 4.1 percent.

The consumer is now contributing to growth, but the ultimate source for long-term growth is entrepreneurship and investment.

Those vital endeavors certainly have benefited from tax and regulatory relief measures over the past two-and-a-half-plus years, but more is needed – especially a shift to tax and regulatory relief when it comes to international trade and a reining in of government spending.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

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