Sales slow as US debts threaten economy

The US Commerce Department reported yesterday that US retail sales fell 0.3 percent in August. However, excluding autos, sales rose 0.2 percent.

The department also reported yesterday that the US current account deficit rose to a record US$166.2 billion in the second quarter, well above analysts' expectations for a $159.35 billion deficit.

See "Retail Sales Down; Trade Gap Larger".

The retail sales were actually not too bad. After revision, July total sales had risen 0.8 percent, so some reversal isn't too disconcerting. Considering the debt burden that the American consumer is bearing, it's a minor miracle that sales have held up as well as it has.

And with the persistent US current account deficit, maybe it's not too bad a thing for retail sales to weaken a little to correct the imbalance. That imbalance is likely to be corrected sooner or later, to some extent or other.

In a recent paper, Dean Baker, co-director of the Center for Economic and Policy Research, warns that US household debt and foreign debt have been rising at rates that may have serious implications for the long-term health of the US economy (see "Dangerous Trends: The Growth of Debt in the U.S. Economy").

I discuss this paper in my post "US debt trends threaten economy".