Story URL: http://news.medill.northwestern.edu/chicago/news.aspx?id=178537
Story Retrieval Date: 5/22/2013 6:14:50 PM CST
U.S. Census Bureau/
Sales at U.S. retailers rose for the seventh consecutive month in January, but the increase was the smallest since June and fell short of expectations.
Retail sales rose 0.3 percent after a downward-revised 0.5 percent increase in December, according to the U.S. Census Bureau. Economists polled by Bloomberg News expected a 0.5 percent increase.
According to Bloomberg LP, excluding autos and gasoline, sales went up 0.2 percent, compared with the forecast of a 0.4 percent increase.
“Consumer spending is continuing to expand, but only at a moderate pace,” said Ryan Wang, an economist with HSBC Securities (USA) Inc., who accurately forecast the total gain in retail sales.
Ken Mayland, president of ClearView Economics, was unconcerned about the smaller-than-expected January increase because “both November and December retail sales came in stronger than anybody expected.”
In that context, the 0.3 percent increase overall moves the recovery ball forward, Mayland said.
Housing-related areas of retail sales were a drag in January.
Building material and garden equipment and supplies dealers saw the biggest decline in sales in January, down by 2.9 percent, while sales of furniture and home furnishing stores dropped 0.3 percent.
At this point, housing activity is still quite low and the construction sector is “sort of flat on its back,” Wang said.
The index of builder sentiment for February remained unchanged for the fourth straight month at 16, according to the National Association of Home Builders. Any reading below 50 indicates negative sentiment about the market. The index hasn’t been above 50 since April 2006.
Nondiscretionary areas of spending, including food and gasoline purchases, showed strong increases in January, mostly due to upward price pressures.
Gasoline station sales were up 1.4 percent, and food and beverage sales rose 1.3 percent.
“In a month where there was not a lot of new income generation, price increases in the nondiscretionary areas are pinching out discretionary purchases” such as apparel, sporting goods and restaurants, Mayland said.
According to Wang, “more labor market improvement is needed to sustain growth in spending.”
Mayland expects all labor market indicators to turn around and show some kind of improvement in 2011.
Accounting for about 70 percent of the U.S. economic activity, consumer spending is watched closely as an important measure of economic health.