2006/11/Consumer Spending Is Holding Up You Do

By Caroline Baum

Nov. 15 (Bloomberg) — For two months now, the commentary following the retail-sales report has been that apart from gasoline-station sales, which are depressed because of falling fuel prices, consumer spending is holding up well.

How can that be? Retail sales fell 0.2 percent in October after a revised 0.8 percent decline in September. Sales at gasoline stations fell 6 percent and 11.1 percent, respectively.

“If consumers are using the savings from the sharp fall in gasoline prices to purchase other items, overall sales should not be declining,” says Joe Carson, director of economic research at AllianceBernstein LP in New York. “How are you going to get any nominal GDP when retail sales are falling?”

The average price of a gallon of regular gasoline was $2.232 last week, down from a record $3.038 in the first week of August, according to the U.S. Energy Department. The notion that the money saved topping the tank is finding its way into other goods isn’t borne out by the facts.

…read more (copy & paste): http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_baum&sid=aqJzNg5ENnsg