Here’s Why Retail Sales Can’t Pick Up Steam
Retail sales in March were held back by the scant progress made in the labor market over the same period. Combined with little growth in wages, Americans found it difficult to spend, which is a concern for economists, as consumer spending accounts for approximately 70 percent of the economy. The previous two months of the year showed that retail sales were poised to extend the gains they made at the end of 2012, and consumer confidence levels have seemed to make a similar indication. However, recent reports from the International Council of Shopping Centers and Redbook have shown some weakness.
The sector did received two pieces of good news at the end of last week.
While March served up another heaping pile of disappointing jobs data on Friday morning, consumer sentiment appears to indicate that Americans still have confidence that the economic recovery will continue to chug forward at a modest pace. On Thursday, Bloomberg reported that its measure of consumer comfort closed out the first quarter of 2013 at its second highest level since 2008 and the Federal Reserve announced Friday that borrowing by U.S. consumers jumped as well.
Both the International Council of Shopping Centers and Goldman Sachs Retail Chain Store Sales Index and Redbook’s weekly measure of sales at chain stores, discounters, and department stores showed hefty gains in last week’ reading as well — bucking March’s trend for stagnating retail sales. But from this week’s look at the data, it seems that economic conditions could not change the trend in retail sales over the long term, at least not yet…
Down from the previous week-over-week jump of 4.7 percent, the ICSC-Goldman Store Sales Index edged forward just 0.7 percent. On a yearly basis, the barometer of retail sales made stronger gains, increasing 2.1 percent, up from the previous week’s 1.9 percent gain. However, that figure still represented a very soft reading. The Redbook reading — in which figures for the first week of the month are compared with the average for the entire previous month — showed a gain of 2.5 percent, decreasing from the 3.5 percent gain recorded the week before.
As with the previous several weeks, cold weather dampened sales of spring merchandise. “Abnormally cold weather throughout the fiscal month of March for much of the country curbed the consumers’ appetite for spring apparel,” said ICSC Chief Economist Michael Niemira in a press release seen by Dow Jones Newswires.
But consumer spending is expected to pick up. “I worry a little bit about the economy going into the second quarter, but I don’t think all is weak,” Stone & McCarthy Research Associates director Raymond Stone told Bloomberg. “Automobiles, housing sales are doing better, lenders are beginning to ease standards, so I think there’s reason to believe that healing will continue.” As the publication reported, consumer spending most likely grew at annualized rate of 3.3 percent from January through March, marking its strongest performance in two years, according to an estimate made by economists at JPMorgan Chase.
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