Economists React: Spending Improves But Consumers Are Cautious
Economists and others weigh in on the increase in retail sales.
- Retail sales rose in January and the January levels for headline, core, and core ex-gasoline spending are above their Q4 levels. This suggests that consumer spending continued to grow at the commencement of the year. Consumers continue to spend, albeit cautiously, amid high unemployment, relatively sluggish returns progression, and tight credit. ? Steven Wood, Insight Economics.
- On balance, this was not a terrible result for January sales, though it falls far small of a convincing show of consumer demand strength. [First quarter] consumer spending will have to build on these figures if it is to achieve the 2.0% or so progression we are currently forecasting. And that is far from in the bag. ? Rob Carnell, ING Bank
- We wrote last month that we advised against looking at either the November or the December results for retail sales in isolation because an augmented accent on ?Black Friday? and ?Cyber Monday? sales in November and lousy weather in late December likely played havoc with spending patterns relative to past norms and thus made the regular adjustment task a more vague exercise than usual. January?s better results in large part represent a bounce from an understated December, and they too should not be viewed in isolation. ? Joshua Shapiro, MFR
- The momentum in retail sales progression picked up over the last three months, although the bulk of the acceleration was due to the gain in sales in November. Nonetheless, in fits and starts, consumer spending continues to advance at a moderate rate and we estimate, based on January sales data, that real [consumer spending] in the month will be 2%?2½% yet to be of the fourth-quarter average at an once a year rate. ? John Ryding and Conrad DeQuadros, RDG Economics
- A point of strength in the report came from a 1.2% jump in electronic and appliance stores. This follows a 3.5% drop in December. Food services and drinking places saw a sales gain of 0.8% in January. Non-store (online) retailers which have been posting solid gains over the past four months gained 1.6% in January.
- Consumers wait cautious, but a decline in the unemployment rate and an improvement in general sentiment seems to have injected some life into consumer spending which we anticipate to increase in the coming months. ? Sireen Hajj, Calylon Crédit Agricole
- Despite the moderate gain in retail sales, the tone of the report is very favourable, and it suggests that U.S. consumers have regained their appetite for spending (after the modest dip in December) and have continued to hold their side of the bargain. In the coming months, with the economic recovery appearing to gain further traction and the labour market likely to commence making new jobs on a consistent basis, we expect consumer spending to wait supportive to progression. Even so, it will be some time before we can expect personal consumption expenditures to be the primary driver of the U.S. economic rebound. — Millan L. B. Mulraine, TD Securities
- January’s performance is really quite encouraging agreed that a weak December result, harsh weather last month, and a lack of winter inventory on the shelves all pointed to another sub-par performance. As the month progressed, but, chain store intelligence prominent better shopper traffic and consumers willing to spend on full-priced items rather than simply sharply discounted goods. Both of these signs suggest that despite the fact that consumers continue to face many headwinds, they are commencement to feel somewhat better about their financial situation. ? Omair Sharif, RBS
- This pace is most unlikely to be maintained? because peoples’ cashflows are surely not sufficient to support it, and access to credit remains severely constrained. Still, for now this is a decent start to Q1. ? Ian Shepherdson, High Frequency Economics
- While we are not expecting the consumer to come roaring back in the near-term, improvements have been quicker than expected considering the still-distressed state of the labor market. ? Adam York, Wells Fargo Securities.
- The underlying components of the report offered an even more clear tone than the headline statistics. Core retail sales ? which strips out autos, gasoline and building materials ? rebounded by 0.8% after declining by 0.3% in December. Core retail sales are up 5.3% over the last three months at an annualized rate, an suggestion of robust progression in household consumption. As recently as August 2009, the three-month progression rate in core retail sales was still negative. We believe that monetary stimulus ? in particular more generous unemployment insurance benefits ? deserve much credit for the sustained progression in consumption. — Zach Pandl, Nomura Securities