July 9, 2004
Associated Press

Why do economists keep a close eye on retail sales?

Because consumer spending is the biggest catalyst in the economy, accounting for two-thirds of all U.S. economic activity.

That's why slumping retail sales reported Thursday sent stocks modestly lower, as investors worried that a slower pace of consumer spending would further cool the economic recovery.

Carl Steidtmann, chief economist at Deloitte Research, believes that even with solid job growth, this is the ''beginning of a slowdown in consumer spending.'' He added that the effects of mortgage refinancing and tax refunds are receding as interest rates rise, taking away from ''consumers' ability to spend.''

But Tracy Mullin, president of the National Retail Federation, disagrees. Mullin said she expects ''a rebound in July as summer clearance sales pick up and the beginning of the back-to-school season gets into gear.''

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