Shop. But Not ‘til You Drop

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At about 70% of GDP, the U.S. consumer is the game changer in economic growth. Consumption, income and retail sales have achieved all-time highs.

Retail sales increased for the second month in a row, up .3% in April and up a revised .8% in March. In absolute terms, retail sales hit a record $497.5 billion. Sure, gas sales were higher because of higher oil prices but shoppers were also splurging on new spring wardrobes and home and garden merchandise. The latest consumer numbers bode well for 2Q GDP, which is widely expected to be north of 3%. Consumer spending is a huge piece of the GDP pie but too much spending is like too much pie. Overspending leads to high consumer debt levels and lack of savings for retirement, which impedes long-term future growth. And nobody really needs that many pairs of shoes. Speaking of retirement, if you have not saved anything it is never too late to start. If you forgo 1 fancy coffee and 1 bottle of water each day and invest that 5 dollars you can have $63,000 in 15 years (based on the last 15 years S&P annualized return of ~10%). Cutting expenses is an obvious way to save. In addition, paying down high interest rate credit card debt is a no-brainer. Working longer is another option, especially in this tight labor market where your skills may be highly valued. Moving to a lower cost area may also be necessary. Finally, become a bargain hunter. The internet makes it so easy to shop you don’t have to actually dig through store bins. Although my sister recently found this Hermes cashmere shawl at the Goodwill store for $3.99. Please follow retail sales on page 12 of the Global Perspectives Book.

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