The Economy: Avoiding the 'U-Word' Doesn't Mean It's Not Still Happening

unexpected-road-signThe establishment press is either getting tired of being beaten up over using the U-word ("unexpectedly," or sometimes "unexpected") to the point of excess when economic news disappoints, or has itself wearied of using the word.

Here's the Associated Press's Martin Crutsinger on today's retail sales report letdown, courtesy of the Commerce Department. The bolded sentence seen after the jump is Crutsinger's substitute for the U-Word:

Retail sales plunged in May by the largest amount in eight months as consumers slashed spending on everything from cars to clothing. The big drop raises new worries about the durability of the economic recovery.

The Commerce Department says that spending fell 1.2 percent last month. Auto sales were down 1.7 percent but there was weakness in a number of areas. Excluding autos, sales fell 1.1 percent.

The big decline cast new doubts about the strength of the economic recovery. Consumer spending accounts for 70 percent of total economic activity.

... The 1.2 percent decline in May sales was the largest decline since sales had fallen 2.2 percent in September. Analysts had been forecasting sales would be weak but remain in positive territory.

For May, the 1.7 percent drop in auto sales followed a 0.6 percent increase in April sales and was the poorest showing in this category since a 2.5 percent February decline.

Expecting a slight positive and getting a large negative is what I would call a "big miss."

The auto sales drop may be suspect, because it's not consistent with direct sales data from the car companies earlier this month.

But there is a clue to how to reconcile the conflict in this statement at the link: "GM sales rose 17 percent, led by a jump in sales of its four remaining brands - Chevrolet, Buick, GMC, and Cadillac - and big orders from fleet customers, such as rental car agencies."

Fleet sales are not part of consumer spending. If those orders were big enough, it may really be that individual and families were buying fewer vehicles in May. That's a big "uh-oh," because fleet sales aren't particularly profitable, and they may not be sustainable at current levels.

That fleet sales and not direct consumer sales might be driving what growth there is in vehicle sales this year (especially, I believe, at government wards GM and Chrysler, and not so much at other companies) is consistent with my observation last week at this post about the "private investment - transportation equipment" sector's outsized contribution to first-quarter GDP growth.

Until "analysts" figure out how to incorporate FUD (Fear, Uncertainty, and Doubt) into their estimates (admittedly difficult, but they get paid to estimate these things), you can expect that the "unexpected" will "unexpectedly" continue to occur -- even if the press stops using the words.

Cross-posted at

Tom Blumer
Tom Blumer
Tom Blumer is a contributing editor for NewsBusters.