Monday Moneybeat: Retail sales and the economy

MARY REICHARD, HOST: Coming next on The World and Everything in It, the Monday Moneybeat.

NICK EICHER, HOST: First today, an alarming sign of weakness in the economy. According to the Commerce Department, retail sales suffered a month-on-month decline in September and that hasn’t happened in seven months. 

You may have heard that 70 percent of the economy is PCEs—Personal Consumption Expenditures—and that’s true. PCEs are purchases of goods and services and they are by far the biggest driver in calculating Gross Domestic Product, GDP. That lackluster retail sales figure is an important component, but it’s not the whole thing.

Retail sales represent goods purchases and they account for a little more than a third of overall PCEs. The other two thirds is services.

Still, the September decline in retail sales is a worrying sign.

This week, the government issues its 3rd quarter GDP estimate. It’s expected the same day the Federal Reserve meets to decide whether to cut interest rates for a third time this year to help head off a possible recession. The economic expansion is in its 11th year, a record.

REICHARD: For its part, the Fed has its own preview of economic activity, the so-called “beige book,” as the central bank calls its dossier on the economy. The beige book says the economy expanded only modestly in September into October, citing “persistent trade tensions and slower global growth” weighing down the American economy.

Those on the Fed board who want another rate cut will likely point to the findings in the beige book to bolster their case.

EICHER: The Fed also last week published a report on factory output in September and it shows American manufacturing declined half a percentage point. It would’ve been just a one-tenth decline had it not been for significant softness in car-making. That recently settled strike at General Motors accounted for a 4.2 percent drop in auto manufacturing.

REICHARD: A mixed week on Wall Street, with three of the four major stock indexes posting gains. The Dow Jones Industrial Average posted a loss, falling two-tenths of one percent. The Russell 2000 small-company stock index was the best performer, gaining 1.6 percent. The tech-heavy Nasdaq picked up four-tenths, and the Standard & Poor’s 500 gained half a point. The S&P 500 is now just 1.3 percent below its all-time high, set back in July.

EICHER: And that is today’s Monday Moneybeat.

(AP Photo/Alex Brandon, File) In this Jan. 30, 2019, file photo Federal Reserve Chairman Jerome Powell speaks at a news conference in Washington.

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