Try to stay in your seats: Retail sales for July have risen .4%. After the dismal showing in May and June, July has shown that we have more willingness to part with our hard-earned cash. News outlets are all over it, and it’s no wonder—how riveting!
Little Indicators Cause Big Waves
In fact, a minute jump in monthly retail sales is a little more interesting than it reads in a headline. Let’s dissect this: an increase in retail sales means that people are spending more money. Spending more money means that people are feeling more comfortable. Feeling more comfortable means that we’re more financially solid than we have been in a while. Being more solid means that things are looking up. Things “looking up” translates to more confidence, more spending—and a handhold to start climbing out of this recession.
It’s All About How You See It
A large part of the market and the economy is perception. Much like the hottest new restaurant or latest trend, the market’s success has a lot to do with how people perceive it. That’s why HP share prices dropped when CEO Mark Hurd stepped down. Confidence in the company’s future was shaken, and people started ridding themselves of stake in a company that they figured was headed downhill. As more and more shareholders bailed, the stock became less wanted, and therefore less valuable.
Pieces Are Clues To The Whole
There are people whose job it is to note and decode every little change in companies, consumer culture, and the stock market. Especially now, when everyone’s ears are straining to hear news of economic recovery, little ticks in spending patterns are analyzed and dissected to predict recovery (or stagnation) on the horizon. We’re so anxious to predict the future that we’re willing to be comforted by any shred of news—and our comfort opens our wallets. And in a consumer-based economy like ours, large-scale spending could lead to good things…just like we hoped.
Don’t Get Distracted By The Day-To-Day
We find that thinking in broader terms helps us keep our perspective—and our sanity. Does a less-than-one-percent increase in consumer spending mean our fantasy trip to Corsica is back on the calendar? Probably not. Despite what we were told in history class, past market patterns are not a reliable way to predict the future. Picture the economy as a beloved pet snake (not that we would have one): it curls up next to you for years, hissing happily. Then one day, as you brush your teeth, it tries to eat you. It’s unpredictable, untrustworthy, and you don’t see it coming until it’s wrapped around your neck.