Retail sales in mid-February got a boost from Valentine’s Day as consumers showed their love with flowers, jewelry, and clothing, providing hope that still-resilient spending will help the U.S. economy skirt recession, Reuters reported.
U.S. chain store sales rose for the second straight week, up 0.9% for the week ended Feb. 17, compared with a 0.8% gain the prior week, the Bank of Tokyo-Mitsubishi and UBS Warburg’s Weekly Chain Stores Sales Snapshot said on Wednesday.
While Redbook Retail Sales Average reported that its retail sales index fell 0.5 percent in the first two weeks of February compared with the same period in January, the index was coming off strong readings last month, and retailers said overall demand is holding firm, Reuters reported. Analysts said these two reports, both of which measure retail sales at department, chain, and discount stores, indicate that Americans have yet to pull back on their spending despite their anxiety over the current U.S. economic slowdown.
One of the reports noted that, in celebration of the romantic mood of Valentine’s Day, jewelry sold quite well during the past week along with cosmetics and other items for women.
Plunging confidence has sparked concerns that consumers, who account for two-thirds of U.S. economic activity, will tame their go-go spending habits and tip the teetering economy into a contraction-or even a recession.
While sales have clearly come down from their highs as stock prices ease and layoffs mount, analysts said that’s the inevitable result of the Fed’s credit tightening to bring economic growth back down to earth after cresting at 5% last year, Reuters reported. And that means a return to slower but more manageable levels of retail sales and consumer spending, analysts told the news agency.
Consumer spending is viewed by many analysts as the cornerstone to any recovery in U.S. growth this year.
The U.S. economy began to stall late last year as manufacturers curbed production to work off a glut of inventories, and falling stock markets dented consumer confidence.
Analysts said the BTM and Redbook reports suggest that retail spending is holding firm in February, after January’s strong showing when retail sales jumped 0.7%, up from a meager 0.1% in December, Reuters reported.
Despite the rebound in sales, consumer confidence went into a tailspin during the past few months as Americans began sweating over new losses in stocks and news of massive layoffs at some major automobile and technology companies.
The University of Michigan’s measure of consumer sentiment suffered its second-largest drop ever in February, to 87.8 from 94.7 in January, to hit its lowest level since November 1993.
And the Conference Board’s January index of consumer confidence had its sharpest one-month drop since October 1990-when the economy was last in a recession-falling to 114.4 from 128.6 a month earlier.
The swift fall in confidence comes after two quick, half-point Federal Reserve interest rate cuts in January, which were intended to get the U.S. economy back on track and restore confidence among consumers and businesses. Still, consumer confidence remains at historically high levels that indicated growth, analysts told Reuters.
Economists at Goldman Sachs said if the Michigan sentiment index were to hold steady at current levels, it would likely mean a recovery in consumer spending to a 2.5% growth rate. Consumer spending, as tracked in the government’s quarterly reports of gross domestic product, grew at a 5.3% rate in both 2000 and 1999.
However, another drop in the Michigan index by as much as 10 points in March and stabilization in April would mean zero consumer spending growth for those two months, the economists at Goldman told Reuters.