U.S. retail sales in February fell much less than expected, but
the strength was seen as fleeting amid a recession that's thrown
millions of people out of work.
Retail sales decreased by 0.1% last month, the Commerce
Department said Thursday. Excluding the effects of the volatile
automobile and gasoline sectors, retail sales last month climbed a
solid 0.5%.
"It looks like consumers are not holding back on spending as
much as they did at the height of the credit crisis last fall,"
Wachovia Securities economist Gary Thayer said.
But the economy remains in poor shape, with 651,000 jobs lost in
February - a massive drop that raised total employment losses since
the recession began in December 2007 to 4.4 million.
Pink-slip fears in American households helped drive down
spending July through December. Then, in January, after a miserable
holiday season, sales surged 1.8%. And the February dip was much
smaller than the drop of 0.4% expected by economists - a surprising
show of strength.
But Ian Shepherdson, an analyst at High Frequency Economics,
said, "It is also highly unlikely to last, given the latest
downdraft in consumers' confidence and the continued pressure on
incomes as payrolls collapse. It looks to us like little more than
a temporary, though welcome, rebound after the astonishingly rapid
plunge in (the fourth quarter)."
A separate report Thursday showed new claims for jobless
benefits rose by 9,000 to 654,000 after seasonal adjustments in the
week ended March 7. The Labor Department data showed the tally of
continuing claims - those drawn by workers collecting benefits for
more than one week in the week ended Feb. 28 - jumped by 193,000 to
5,317,000, the highest level since the government started keeping
track in 1967. Continuing claims are up more than 2.5 million in
the past year alone, a reflection of how hard it is for the
unemployed to find new work.
"The U.S. consumer is faced with daunting fundamentals," MFR
Inc. analyst Joshua Shapiro said.
Because of the bad job market, consumers are leery of big
purchases. Automobile and parts sales in February plunged 4.3% and
are down 23.5% year over year. Excluding autos in February, all
other sales climbed 0.7% - much better than the 0.1% gain expected
by economists.
Gasoline station sales, propped up by rising gas prices, gave a
lift to the overall retail number. Last month, gasoline station
sales climbed 3.4%. Gas sales rose 2.8% in January. Stripping away
sales at gas stations, demand at all other retailers decreased 0.4%
in February.
The retail sales report details how people spend their money.
Consumer spending is a vital part of the economy, making up about
70% of gross domestic product, which is the broad measure of
economic activity. Weakness in spending in recent months is both a
cause and symptom of the recession. People didn't open their
wallets because the stock market collapsed, home prices crashed,
heavy household debt, and those layoff fears.
Data last week showed the savings rate in January reached a
nearly 14-year high. The Commerce Department reported personal
savings as a percentage of disposable personal income was 5.0%, the
highest since 5.5% in March 1995 and up from 3.9% during December
2008.
The economy fell 6.2% at the end of 2008, the worst showing in
almost 27 years. Companies losing revenue to the slump are cutting
costs by firing people.
The rising unemployment rate is pushing up credit card
charge-offs; those reached a new high of 7.74% in January.
Uncollectible debt could lead banks to reduce credit lines to
customers, which would chill spending and hurt the economy
further.
Analysts said deep discounting could have had an impact on
retail sales in February.
Excluding auto sales and gas station sales, all other retailers
saw sales rise 0.5% in February.
Sales last month climbed 2.8% at clothing stores; 1.2% at
electronic stores; 1.3% at general merchandise stores; 0.3% at mail
order and Internet retailers; 0.6% at health and personal care
stores; 0.7% at furniture retailers; and 0.2% at sporting goods,
hobby, book and music stores.
Sales fell 0.2% at eating and drinking places; 0.7% at food and
beverage stores; and 0.2% at building material and garden supplies
dealers.
Paul Dales, an analyst at Capital Economics, said the numbers
lend hope that GDP won't tumble in the first quarter as much as it
did in the fourth quarter.
"February's retail sales figures suggest that consumers have
returned to the shopping malls after the catastrophic holiday
season," he said. "Nevertheless, it is too early to conclude that
this marks the start of a sustained recovery."
A report by the Commerce Department said U.S. businesses shed
inventories a lot in January. Inventories decreased by 1.1% to a
seasonally adjusted $1.440 trillion. Business sales fell 1.0% to
$1.004 trillion.
The inventory-to-sales ratio held steady at 1.43, Commerce said.
The gauge indicates how well firms are matching supply with demand.
It measures how long in months a firm could sell all current
inventory. The ratio had been originally estimated at 1.44 in
December but was revised to 1.43. The gauge had been 1.25 in
January 2008. A rising I/S ratio can mean a big correction in
inventories down the road. That could weigh on GDP in coming
months. Therefore, the halt during January to the gradual rise over
the past year is a promising sign, indicating businesses aren't
letting inventories get out of hand amid the recession.
"Aggressive moves to keep inventories under control in the face
of substantially weaker final demand will continue to contribute to
weakness in orders, production, and imports as the cyclical
downturn persists," MFR's Shapiro said.
-By Jeff Bater, Dow Jones Newswires; 202-862-9249; jeff.bater@dowjones.com
(Brian Blackstone contributed to this story).