It's bad. But it's not that bad. The Commerce Department reported yesterday that retail sales fell 0.1% last month. The figure was a surprise to some because it follows two positive months, and the "cash for clunkers" thing along with a looming recovery were expected to lift sales more. Then when you strip sales of autos and parts, sales dropped 0.6%. This figure should not be surprising given the level of discounting retailers are doing, and the general reluctance by consumers to spend.
Though the WSJ pushes this as "grim data," it is a story about the past, not the future. Beware the negative feedback loop. If a slower sales figure makes us disbelieve a recovery is around the corner, and thus we spend less, then sales will decline again. Consumer spending and consumer confidence will some of the last figures to rise in any recovery. Unemployment will continue to go up though GDP may improve and that will be enough to make people reluctant to spend. There's enough information to say that some segments of the economy may improve quickly, but it would be foolish to bet on a quick recovery. That may be so, but let's not make things worse by getting gloomy over figures that aren't as bad as they seem.