Retail Sales and Personal Income Essay Example | Topics and Well Written Essays - 500 words

Retail Sales and Personal Income - Essay Example Personal income does not usually rise fast enough to absorb increases in interest rates. This is more likely to be an issue for people whose budgets are already stretched, since people with lower credit scores or worse ratios of income to expense are more likely to have to resort to variable rate loans in order to qualify for the credit they want, and these are the very loan payments which will rise with interest rates, forcing these consumers to make compensatory budget adjustments.  The U.S. retail sales forecast from the National Retail Federation for calendar 2006 is 4.7% (NRF Forecasts 4.7% Growth for 2006 Retail Sales, 2006), more bullish than the Bloomsberg survey forecast of 3.4% for the same period (Leading U.S. Indicators Index Points to Slower Growth, 2006). Both forecasts exclude automobile sales, which has contributed to much of the recent volatility of the consumer spending and retail sales figures on a quarterly basis. The NRF press release acknowledges that pressure s facing consumers include rising interest rates and diminishing sources of â€Å"spending power,† by which they mean that as the housing market cools, home equity will not be able to sustain as much spending as it did in the past.For 2005, the NRF forecast for retail sales was 5.6%, while the actual retail sales growth for 2005 was 6.1% (NRF Forecasts 4.7% Growth for 2006 Retail Sales, 2006).   Bloomberg’s consensus forecast for the second half of 2005 was 6.9% (U.S. Economy Expanded at a 4.1% Annual Pace in Third Quarter.