Nominal Retail sales rose 1.0% in January the first gain since June last summer.

In the 18 months since August 2007 nominal retail sales have been positive half the time and negative half the time. In the most recent nine months six have been negative and three positive. For the first nine months of the last 18 the ratio is reversed seven months are positive and two negative. It was the acute phase of the financial crisis which struck last September, as depicted in the nominal retail sales numbers that hit consumer spending hard. Retail sales numbers prior to last September give credence to the idea that the consumer continued to spend through the early and mid part of the sub-prime crisis. Given that outlook, consumer spending could be expected to resume when the acute phase ends and credit began to flow again. Reviving consumer spending once the acute phase of the crisis is over is the idea behind most predictions for a recovery in the economy in the second half of 2009.

But real retail sales, the nominal number corrected for prices is much less positive. It tells of a more cautious consumer, one who began curtailing spending 18 months ago. Since August 2007 fifteen months have had a negative or zero real retail sales numbers. In only three months did real retail spending grow. These consumers are much more aware of the turmoil in the financial markets and potential for economic dislocation and they stopped spending months before the jobs numbers turned negative in January of 2008.

The consumer who is being depended on to borrow and buy and fuel the recovery is not the relatively optimistic consumer of nominal retail sales but the far more cautions consumer of the real numbers. Predicting a recovery based on the nominal numbers is shooting for a disappointment.