Retail Sales Report Counters the Fed View By Tony Crescenzi RealMoney.com Contributor 9/14/2007 9:49 AM EDT

Weakness in retail sales will revive concerns about the consumer following data throughout the week that seemed to throw cold water on last week's employment report. In particular, data on weekly chain-store sales and jobless claims both painted the consumer in a positive light. Weakness was seen in a variety of categories.

Although today's data are weak, there is rationale in looking at the report from a distance, by first noting that of the 0.4% decline in non-auto sales, gasoline sales shaved three-tenths of a percentage point. Second, it is worth noting the volatility of retail sales data, as evidenced by the four-month annualized change in non-auto sales of 5.4%, a touch above the long-term average.

The volatility of the retail sales report is quite evident in the figure on non-store sales, which captures Internet sales. It fell 1%, bucking what is normally a strong pattern of gains. Moreover, although clothing sales fell 0.1%, the decrease followed an increase of 1.6% in July.

The Federal Reserve is likely to look at these data from afar; hence, the data are likely to have very little impact on the Fed's upcoming rate decision. It is nonetheless notable that in response to last week's payroll number, Fed officials said they felt spending was "holding up," a theory tested today.

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Tony Crescenzi is the chief bond market strategist at Miller Tabak + Co., LLC, and advises many of the nation's top institutional investors on issues related to the bond market, the economy and other macro-related issues. At the request of the Federal Reserve, Crescenzi is a regular participant in the board's Livingston Survey of economic forecasters. He is also the author of the revised investment classic, The Money Market, first published in 1978 by Marcia Stigum, and The Strategic Bond Investor. At the time of publication, Crescenzi or Miller Tabak had no positions in the securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Crescenzi also is the founder of Bondtalk.com, a popular Web site covering the bond market and the economy. Crescenzi appreciates your feedback; click here to send him an email.

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