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Retail Sales Up, but Consumers Still Down: Howard Davidowitz

Daily Ticker

U.S. retail sales saw their best increase since September as Americans purchased cars and other goods, but retail expert Howard Davidowitz, chairman of Davidowitz and Associates, says the big picture isn't as bright as that might suggest.

First the good news: Sales grew a seasonally adjusted 0.5% in December versus 0.4% in November, according to the Commerce Department. That topped the 0.2% increase economists had expected, and excluding autos, sales grew 0.3% in December vs. 0.1% the month prior.

Related: U.S. Economy Stuck in Second Gear: David Levy

However, "when you go through the companies and segments it is pretty bad," says Davidowitz, referencing the following areas:

  • The grocery store and food business, most notably SuperValue (SVU), is on the verge of collapse.
  • Department stores, like J.C. Penney (JCP) and Sears (SHLD), are struggling to keep afloat.
  • The office supply business is "bad," he says, noting Staples (SPLS) and Office Depot (ODP).
  • And, specialty retail chains chains like Aeropostale (ARO) and Coldwater Creek (CWTR) are generally negative, he adds.

Related: Lampert Takes Over as Sears CEO: He's Waiting to Slice and Dice It, Says Macke

"The are some really good areas helping the economy, but if you look at the individual retail companies one by one...most of them are very very far off track," he says. The sectors helping the economy chug along, he says, include: housing, autos and energy.

What does all this mean for the U.S. consumer?

While a slight improvement in the economic data suggests a recovery may be in the making, think again, says Davidowitz who has been a long-time bear on the U.S. consumer.

"I think the American consumer is going to continue under tremendous pressure," he says. "The U.S. consumer won't recover and can't recover because we have not growth."

The consumer accounts for 70% of gross domestic product. Earlier this week, Chicago Fed President Charles Evans said he believes the U.S. economy will grow at a 2.5% clip in 2013. To put that in perspective, over the last fifty years, U.S. GDP growth has averaged between 3% and 4%.

"If we get 2.5%, that's no job growth; that's the problem," Davidowitz says. "The fact is people are working fewer hours, their income is down 10% over the last four years, and they are more insecure and they are making less."

Related: Economy Adds 155K Jobs in December: It's a 'Slow and Steady' Recovery

To that point, a new report shows that the number of working poor families is on the rise. According to The Working Poor Project, 200,000 families fell into near-poverty levels in 2011 versus 2010.

The official poverty rate is defined as an income of roughly $23,000 for a family of four. Near-poverty is defined as families who make less than twice that.

According the reports analysis, nearly 33% of all families are struggling up from 28% in 2007. That equates to 10.4 million families and around 50 million individuals.

Tell Us What You Think!

Do you think the consumer is on the rise? Or, do you agree with Davidowitz?

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