Retail slowdown in the U.S. an implications for China

Danielle DiMartino writes about the latest U.S. retails sales data in the Dallas Morning news:

Goldman Sachs chief economist Jan Hatzius wrote, "the year-on-year growth rate has plummeted from 1.3 percent in 2005 to -0.2 percent as of June 2006. Year-on-year declines in retail employment are unprecedented outside of recessions."

[...]

Consumers may still be consuming, but they've become increasingly sensitive to prices.

But gas prices are only part of the story behind the decline in retail employment, Mr. Hatzius said: On Tuesday, Freddie Mac forecast that cash-out refinancing would drop to $125 billion in 2008, from $275 billion in 2005.

[...]

In a speech last summer, Alan Greenspan discussed his research into home equity withdrawals and consumer spending. His findings: About a third of the cash people extract from their homes directly finances current consumption.

It stands to reason that retailers would be the first to detect the diminution of this source of disposable income, which is at least partially to blame for the 86,000 jobs the sector has shed in the last three months.

While the Development Bank Research Bulletin suggests that China may be able to escape the slowdown:

In the first and second quarter of 2006, China is growing at unprecedented and unexpected pace, at 10.4% year-to-year.

[...]

Morgan Stanley, after two years of very poor performance in forecasting China's GDP growth finally makes a large upward revision of the number. They have been voicing their worry about China slowdown for a long time, and have been the most pessimistic about growth rate of India and China back in 2004, and 2005.

[...]

I think China's potential slowdown in the future is more likley to be caused by domestic problem instead of external factors. China is not exporting many durable goods to the U.S., and I think Americans even in recessions have to buy clothes and have to give Christmas gifts to children. I don’t deny that China is dependent on U.S. market, but not in the same way as Japanese do (they export cars, the demand of which is more cyclical)