Retail sales strong

The following comments are from Scott Grannis, Chief Economist at Western Asset Management...

"The consumer is alive and well. Retail sales in real terms are up almost 6% in the 12 months through January, and that is about as strong as it gets. The "soft patch" that resulted from the Katrina disaster is a thing of the past. Ex-autos, real sales were up about 7% in the past year, which is about as strong as we've ever seen. Retail sales have proved robust despite the big slowdown in mortgage refinancing activity that has occurred over the past six months, and despite a big dropoff in mortgage equity withdrawal and growing signs of a peaking in the housing market. No sign here of any economic slowdown. Indeed, this is the sort of strong growth that, if continued, will soon cause the Fed's output gap model to signal an overheating economy."