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Does a boost in retail sales mean the economy is back on track?
Consumer spending jumps 1.1 percent, the highest increase in five months
It looks like Americans are ready to open up their wallets again. According to a new report from the Commerce Department, retail spending is up 1.1 percent from January and 4.6 percent from February 2012.
That's the biggest rise in five months, according to Reuters, far better than the 0.5 percent boost economists had predicted. Paired with last month's positive jobs report, does this mean the U.S. economy is on the mend?
Neil Irwin of The Washington Post is certainly optimistic:
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Friday's jobs report was quite good, and it followed a series of solid jobs numbers. Employers didn't sweat the fiscal cliff in December. They didn't sweat the sequester in February. Housing market indicators — construction, prices, sales — are all pointing up. Put it all together and it's hard to escape the conclusion that the U.S. economy is finally starting to gain some traction. [Washington Post]
That rosy assessment has one problem, says the Wall Street Examiner's Lee Adler: What about gas prices? Those retail sales include money spent at the pump and, according to Reuters, gas prices jumped by 35 cents in January. Rising gas prices "actually act like a tax on disposable income," writes Adler, meaning "the year to year change in real retail sales, ex gasoline prices and adjusted for inflation in February was not a gain at all as the headlines blared, but a decline of 0.5 percent."
Alyssa Oursler of InvestorPlace reluctantly plays the role of Debbie Downer, reminding us of not only the spike in gas prices but also "the high number of retailers that have provided not-so-hot outlooks," including companies like Express and Walmart. In fact, according to The Associated Press, the stock market remained largely static despite the rise in consumer spending.
Overall, the reaction among analysts and Wall Street reporters is a collective "it's good, not great." Matthew Yglesias of Slate does find a few bright spots, especially online:
What is true is that "general merchandise stores" (department stores and similar) suffered a 4 percent decline. That's ugly. But autos were up, grocery stores were up, apparel stores were up, restaurants were up, and the exciting nonstore retailers category soared 14 percent. Amazon killing department stores, in other words, isn't the same as poor retail sales. [Slate]
Despite the mixed signals, the numbers were good enough to make economists raise their first-quarter growth estimates by up to eight tenths of a percentage. Not huge, but it's something.
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Keith Wagstaff is a staff writer at TheWeek.com covering politics and current events. He has previously written for such publications as TIME, Details, VICE, and the Village Voice.
