The latest data on retail sales, tax receipts, and consumer sentiment all look consistent with the soft landing scenario.
The Census Bureau reported today that September seasonally adjusted retail sales were down 0.4% compared with August. Most analysts took cheer from the fact that, if one excluded the plunge in gasoline, sales would instead have been up 0.6%. Notwithstanding, Barry Ritholtz argues that the sum of all sales is the relevant measure, and Calculated Risk thinks this means that inflation-adjusted retail sales declined overall in the third quarter. But even including everything, seasonally unadjusted September sales are still 5% above the September 2005 value. I read these data as consistent with the hypothesis that the economy is soft, but not crashing.
The drop in federal tax receipts that worried me a little last month appears to have been a temporary aberration, with September 2006 revenues suggesting incomes are still solid:
And the Michigan index of consumer sentiment is in the midst of a strong rebound:
Perhaps not as scary a Halloween as some of us were anticipating.