>April retail sales plunge unexpectedly. -0.2% vs. expectations of +0.5%.
>Apparently, the (partial) bursting of the bubble did what 5 interest
>rates hikes and the certainty of more to come wouldn't. So far, my view
>that the US economy is completely dependent on the stock bubble is born
>out.
I'd be careful about declaring the bubble burst on the basis of one month's retail sales figs.
But if you're right, why do you conclude that 5 interest rate hikes had nothing to do with the decline in retail sales?
>Doug, do you have the link to that paper denying the wealth effect?
>Thanks!
Poterba, James M., and Andrew A. Samwick (1995). "Stock Ownership Patterns, Stock Market Fluctuations, and Consumption," Brookings Papers on Economic Activity 2, pp. 295-372 [which argues that stockholdings are too concentrated to have much of an effect on consumption, even luxury consumption]
and
Ludvigson, Sydney, and Charles Steindel (1999), "How Important Is the Stock Market Effect on Consumption?," Federal Reserve Bank of New York Economic Policy Review, July <http://www.ny.frb.org/rmaghome/econ_pol/799lud.pdf> [which answers the question with a "hard to say"]
Doug