Another February report has been issued, and like most of those coming before it--ranging from non-manufacturing activity to employment growth--this one was favorable as well. Specifically, the Commerce Department earlier this morning reported that retail sales had surged by 1.1% last month, a tad better than the 1.0% increase that had been the latest consensus expectation. Moreover, data for January were revised upward. Originally, the sales gain had been estimated at 0.4%. That data point was revised to show a more formidable increase of 0.6%.
Meanwhile, if we back out the auto component from the aggregate total increase, we find that the so-called core rate of retail sales growth was still an appreciable 0.9% in February. A month earlier, excluding autos, the gain had been even stronger, at 1.1%. Clearly, the U.S. consumer is still out there spending, and that augurs well for continued solid GDP growth in the current quarter and perhaps over the balance of the year.
In the meantime, auto sales propped up the overall performance, with that metric climbing by 1.6% last month compared to January. At the same time, auto sales are up by 6.9% from a year earlier. Such sales had fallen back in January. All told, though, we believe that Detroit is on the way back, a fact that was underscored recently by some better earnings figures.
But the big contributor to the better sales performance is the employment situation. Including the 227,000 new jobs totaled in February, the nation has added an average of 245,000 payrolls a month since December. With employment now clearly on the mend, and the jobless rate having come down from more than 10% in the depths of the 2007-2009 recession to 8.3% at present, there is little wonder that Americans are spending more.
The one fly in the ointment is rising gasoline prices. Last month, the higher price points helped sales at gasoline stations climb by 3.3%. That was the strongest pace in almost a year. Further down the road, though, such increases would have the potential to hurt retail sales, as more of consumers' incomes would logically have to be diverted to such expenditures.
Finally, in addition to auto and gasoline sales, the latest month's total was aided by rising outlays for motor vehicles and parts, electronics and appliances, clothing and accessories, and sporting goods, hobby, and music expenditures. Restraining sales last month were declines in spending on furniture and home furnishings and general merchandise. However, sales at department stores, a component of the overall general merchandise category, did increase notably last month.
On balance, then, this was a very solid report, and, as noted, gives us confidence about the now-ending first quarter as far as overall economic growth is concerned.
At the time of this report's posting, the author did not hold positions in any of the companies mentioned.