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Kai Ryssdal: There was much rejoicing yesterday after the Federal Reserve wrapped up its meeting on interest rates. A bull market in optimism, if you will, with the Fed’s pronouncement that the recession is winding down. Today consumers splashed that market smack in the case with a cold bucket of reality. Despite fatter paychecks from stimulus money, and a boost from the Cash for Clunkers program, we learned this morning retail sales actually went backwards last month. Marketplace’s Amy Scott asked around. She found a lot of economists were taken by surprise.
JENNIFER LEE: My gut reaction was “Oh no.”
Jennifer Lee is an economist with BMO Capital Markets. She says people cut back on almost everything last month, from sporting goods to appliances.
LEE: Not that everyone was expecting anything hugely positive, but I guess the widespread weakness amongst all the sectors was very disappointing.
Another sign of weakness came from Walmart. The company says sales and revenue fell last quarter, though its profits held up thanks to cost cutting.
Auto sales did rise by almost 2.5 percent. But not as much as analysts had expected. The Cash for Clunkers rebate program kicked off in late July, so more of a bump may show up this month.
But Joshua Shapiro at consulting firm MFR says interest in Cash for Clunkers is waning. And the program may be cutting into other retail sales.
JOSHUA SHAPIRO: If people are scrimping and saving to buy a car, and sorta just the $4500 put them over the top to be able to afford it, odds are yes, it does affect other spending.
You hear so much about consumption driving the economy. Can it turn around without the consumer’s participation? Scott Hoyt with Moody’s Economy.com says yes, for a while.
SCOTT HOYT: They’re not going to be the leaders of the economic recovery, particularly if it has started or if it is starting in the near future. It’s going to have to be businesses and government that drive the near-term recovery.
Hoyt says the hope is, once the recovery starts creating jobs and income, consumers will join the ride.
Today’s numbers are a reminder that it could be a slow and bumpy road along the way.
In New York, I’m Amy Scott for Marketplace.
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