Potential Impact of Retail Sales and Personal Income Forecasts on Essay

Potential Impact of Retail Sales and Personal Income Forecasts on Tobacco Industry - Essay Example But regardless of the source, increases in the retail price of cigarettes causes a decrease in the quantity of cigarettes demanded, though the ratio is less than 1 to 1 when comparing the percentage price increase to the percentage of consumption decrease. This shows that there is resistance to forgoing consumption altogether, and that few if any substitute goods are available to the consumer. The correlation between income and spending can be summed up as follows: "In general, growth of retail sales follows the same path as the growth of personal income. However, this may not be the case during economic slowdown and expansion. In general, in the time of recession, retail sales tend to grow slower than personal income, while in the time of economic boom, retail sales tend to grow faster than personal income" (Kovalyova & Zakharova, 2003). This implies that consumer spending anticipates future economic conditions, and that so-called consumer confidence plays a bigger - or at least a leading - role in purchasing patterns than do actual changes in macroeconomic conditions.