That’s what I get for cheerleading

August 13, 2009

In this post, I argued that Cash for Clunkers would stimulate overall consumer spending, not just spending on cars. Well, the first month of data is in, and two findings stick out:

  • Automotive sales went up.
  • However, retail sales as a whole declined unexpectedly.

    In light of this, I freely admit that I had been too optimistic about Cash for Clunkers. However, I would caution against writing off the program altogether – its effect may have been too small to counteract some other factor(s) which depressed retail sales; and some of its effects, particularly in buoying auto manufacturing, may not have come into play yet.

    The Times reports on the rest of July’s retail sales data:

    The Labor Department reported that retail sales fell by a seasonally adjusted 0.1 percent from June, and were 8.3 percent lower than a year ago. Economists, who had been expecting an increase of 0.7 percent, called the numbers a sobering reminder of the persistent weakness in consumer spending, which makes up 70 percent of the United States economy. …

    Consumers spent 2.4 percent more on motor vehicles and automotive parts last month compared with June as the government’s popular “cash for clunkers” car-purchase program got under way, but any money that flowed into the pockets of car dealers seemed to come at the expense of other businesses.

    Retail spending excluding sales of cars and car parts fell 0.6 percent. People spent less on furniture, electronics, appliances, books and music, implying that American consumers are still wary of the weak job market and an uncertain economic recovery.

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