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Is The Economy Really Starting To Turn Around? [AUDIO]

New government figures show retail sales rose 1.1 percent last month, and 1.2 percent in August – the largest gains since October of 2010.

Scott Olson, Getty Images

Rutgers economist James Hughes says this is is a welcome trend, but we shouldn’t get carried away.

“Consumers are getting more optimistic,” he says, “But the figures are inflated a little bit by the higher cost for gasoline- retail sales is an important indicator about the health of the economy because it does tell you what consumers are doing. Are they feeling confidant, less confidant? What seems to be happening is a lot of households are in better financial shape today, even though growth has been moderate, they’ve been able to refi their mortgages, they’ve been able to pay down debt, and they may well have fatigue from non-consumption and really want to open up their pocketbooks again. But, on the other hand, we really need a number of months of data to be able to say whether we’re fully on the mend or not.”

Hughes points out, “We have a global economy that’s weak, we have Europe, which could go into recession. We could have a crisis in the Middle East, Washington could not solve the fiscal cliff, and corporations facing all those unpleasant facts may not continue hiring, they may weaken hiring in the 4th quarter, so there’s still a tremendous number of uncertainties out there…It could be the start of a trend – a positive trend – however it’s best not to get too exuberant.”

He adds, “Consumers are feeling better about what’s happening in the economy- households have improved their financial positions – have paid down debt, and the housing market has had some bounce-back, but we really have to wait and see. We’ve had a lot of false starts over the past 2 years, where we got optimistic and then were very disappointed.”

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