by Calculated Risk on 2/09/2007 12:01:00 AM

From MarketWatch: Winter's arrival warmed up sales

Same-store receipts at 55 of the nation's top chain-store retailers climbed 3.9% last month, according to Thomson Financial. That's above the 3.1% forecast. Same-store sales, considered the best measure of retail growth, are gleaned from the receipts rung up at stores open longer than a year.

At the International Council of Shopping Centers, which calculates same-store sales in a slightly different manner, the results were 3.7% higher, exceeding the 3% projection.

"Overall, the tone was pretty good," said Michael Niemira, ICSC's chief economist. "It was certainly a nice finish to the fiscal year -- and a nice start to the calendar year."

So I was asked today:

"Where is the consumer bust?"

Last month I wrote:

Professor Leamer identified two key missing ingredients for a recession: enough job losses, and a credit crunch. These are the two issues I wrestled with over the holidays, and I couldn't come to a definitive conclusion.

At the core, recessions are about jobs, and it is easy to imagine scenarios with job growth slowing to 100K per month, maybe even 50K per month. But that isn't a recession.
...
So how can the U.S. economy slide into recession in '07?

Some possible sources: a credit crunch based on bad loans in the RE sector (and possibly in CRE and C&D too), less consumer spending based on falling MEW, and another downturn in the housing market. If all of these can be avoided, a recession is unlikely.

We are now seeing a sector-specific credit crunch. However we are still waiting for a significant decline in MEW, and another downturn in the housing market.

This is just Act II. The future is uncertain, and the odds of a 2007 recession are still about a coin-flip ... but if the play unfolds as I suspect it might, Hamlet dies in Act V.