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Investing Specialists

Has the Retail Sales Yo-Yo Finally Stopped?

Consumer spending is the key to understanding which way the economy is headed.

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The best news of the week was the retail sales report, which surprised a little on the upside. With similar growth rates for July and August, the wonderful binge of early spring and the horrible hangover of late spring/early summer are finally behind us.

Consumer spending is the key to understanding which way the economy is headed. The economy now seems to be moving in both the right direction at a slow but sustainable pace (and with a lot fewer stimulus programs).

On the other hand, manufacturing news this week continued to show some weakness. Based on my analysis below, the softening is more of an echo of poor consumer spending late this spring than a renewed sign of weakness.

Robert Johnson, CFA does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.