The U.S. Census Bureau announced on Friday that advanced estimates of February retail trade sales were $355.5 billion. This is an increase of .3% from the previous month after a .1% rebound in January, and is 3.9% above February 2009. This beat analysts’ projections, who as a group expected a decline of .3%. It was expected that February’s winter storms that hit much of the Mid-Atlantic could have negatively affected retail sales figures.
February’s numbers look even better if we leave out automobile sales, which has been on a continuous decline over the past few months. Excluding automobiles, retail sales in February gained .8% from the previous month. Total sales for the December 2009 through February 2010 period were up 4.5% from the same period a year ago.
Consumer spending accounts for nearly two-thirds of the nation’s economy. Looking at retail sales, which accounts for about half of all consumer spending, can give us a better idea of the direction of the economy. At first glance, it may appear that the reaction of many consumers to just stay home and save money over course of the recession is giving way to the desire to get out and go do something. Gasoline stations sales were up 24% from February 2009 and non-store retailers sales were up 11.8% from last year.
But the government’s retail sales numbers don’t adjust for inflation or price changes, and fuel prices have increased over the past year. In the first week of February 2009, the national average for a gallon of regular unleaded was $1.94. Add another $.77 to that to come up to a national average of $2.71 a year later – more than a 39% price increase.
So according to these numbers, consumers spent more on fuel in February than they did the year before, but only because fuel prices have jumped so much in twelve month’s time – not because they’re using more. This is an important consideration because consumers tend to drive more when they feel better about the economy; they go shopping, take road trip vacations, and they just get in the car to see if they can find something interesting to do.
Other discretionary sales increases in February that may signal that consumers are gaining confidence in the economy were in electronics and appliance stores, up 3.7%; miscellaneous store retailers which gained 2.5%; food and beverages, up 1.3%; and sporting goods, hobby, book, and music stores with a 1.2% gain over the month.
While February’s reading sounds like good news for the economy, it’s too early to tell if it’s a short-lived jump. Taxpayers who expect refunds tend to file very early in the tax season to get their money back as soon as possible, and those tax refunds regularly give a boost to the economy early in the year. Add to that some bonus tax credits brought in by Recovery Act funding, and we may just have a temporary increase in spending.
Yes, it’s too early to get excited about a few good numbers for retail trade sales. The national unemployment rate is still 9.7% and we won’t have a strong economic recovery until the unemployed and underemployed are financially secure again.
Commerce Secretary Gary Locke said in a statement after the release of the Census Bureau’s report, “The resilience of retail spending in the face of February’s snowstorms shows the growing willingness of consumers to spend, and it’s another welcome sign of economic recovery. But rescuing the economy is only the first step. Jobs are the president’s top priority, and we will continue to do everything we can every single day to put Americans back to work.”
Source:
U.S. Census Bureau
Department of Commerce
Consumer Reports.org
