This morning’s retail data came in way better than expected, with sales growing 0.6% rather than the expected 0.3%.
Paper Economy explains that there is a sharp correlation between retail sales and rising home prices. That correlation has continued through the recession, and is reflected in today’s numbers.
This chart would suggest, that if we want retail sales to continue to soar, we’re going to need to revive home prices much further. But there are some significant doubts about the housing recovery.
The blue here is Case Shiller home prices, with the orange retail sales.
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