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TwitterAdding on to the happy numbers released yesterday by RealtyTrac Inc, reports released by the Commerce Department, claim that the retail sales posted a gain of 0.3% last month. December’s result was adjusted downwards to 0.1% growth from 0.5%.
Economists surveyed by Dow Jones Newswires had forecast a 0.3% decrease. Infact, prior to the results, economists painted a sorry picture for the results. Ellen Zentner from BTMU said “Blame Toyota, but mostly blame the weather because we expect a -3.3% decline in motor vehicle sales in February and that’s going to be the biggest drag on overall retail sales, but weather also depressed other areas of spending as snowstorms and all-around nasty weather hit the country over and over again throughout the month.” However, excluding the car sector, all other retail sales rose 0.8%.
Retail Sales Rise
Retail sales are an important indicator of economic health since consumer spending makes up a substantial 70% of the Gross Domestic Product. The retail sales report showed U.S. car and parts sales dived by 2.0% last month. Toyota suffered because of fallout from recalls and quality problems. Its sales fell 8.7% to 100,027 vehicles, previously issued industry data showed. It is also interesting to note that these positive numbers come in spite of fierce blizzards that crippled the East Coast for days together. One of the factors that contributed to the sales may have been the Super Bowl football championship game early in the month, which may have caused electronic store sales to soar.
A more detailed report shows that increases included restaurants and bars, 0.9%; electronic and appliance stores, 3.7%; food and beverage stores, 1.3%; clothing stores, 0.6%; general merchandise stores, 1.0%; sporting goods, hobby, book and music stores, 1.2%; building material and garden supplies dealers, 0.5% and furniture retailers, 0.7%. Non-store retailers, oddly, were flat last month despite the snow that paralyzed the East and must have kept many consumers housebound. The non-store category includes mail-order and Internet retailers. Health and personal care store sales fell 0.7%, the only category aside from autos to report declining sales in February.
Sales have risen in four of the past five months, and were up 3.9% compared with a year earlier.
Economists have been worried that the economic recovery they believe began last summer could falter if consumer spending begins to lag. The better-than-expected February gain may ease these concerns. Consumers are still facing major challenges, including continued job losses, large levels of debt and slow income growth. But consumers also have many pent-up demands after two years of recession, it seems. Economists are hoping that businesses, which have shed 8.4 million jobs since the recession began in December 2007, will soon start rehiring laid off workers. That would give households the incomes they need to support spending growth. A report last week that showed the economy lost fewer jobs than anticipated in February signaling employment is on the verge of accelerating, a development that would spur spending in coming months. “There is slow re-engagement from consumers,” Ethan Harris, head of North America economics at Bank of America- Merrill Lynch Global Research in New York, said before the report. “As the economy slowly improves and the labor market stabilizes, people get a little less conservative in their spending.”
All in all, the sentiment is positive. The snap analysis from the Associated Press is that this was “a surprising increase … as consumers did not let major snowstorms stop them from storming the malls. The advance, the biggest since November, provided hope that the recovery from the Great Recession is gaining momentum.”
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