Sales at U.S. retailers rose in March for a ninth consecutive month, easing concern that the jump in food and fuel costs would cause consumers to retrench.
Purchases increased 0.4 percent following a 1.1 percent February gain that was larger than previously estimated, Commerce Department figures showed today in Washington. A report from the Labor Department showed job openings in February jumped by the most in six years.
Declining unemployment and a cut in payroll taxes for 2011 are helping sustain sales at chains like Macy’s Inc. (M) and Saks Inc. (SKS) At the same time, mounting gasoline and grocery bills are eroding confidence and straining paychecks, making it likely consumer spending, the biggest part of the economy, cooled in the first quarter from the final three months of 2010.
“The data point to pretty resilient consumer spending,” said John Herrmann, a senior fixed-income strategist at State Street Global Markets LLC in Boston. “Although there was concern about the tax that higher gasoline prices are imposing, consumers basically shrugged off those headwinds. We have a better labor market, with job growth.”
However, the pace was slower than anticipated, and has led to more lowering of estimated US GDP readings:
Paired with a weak report on businesses' restocking of inventories, also released Wednesday, and lackluster news earlier this week on U.S. trade, the latest data prompted some economists to revise down their estimates for first-quarter growth.
Barclays Capital cut its estimate to 2%, down from 3.5%, while JP Morgan said it now sees gross domestic product growing only 1.4%, rather than 2.5%. "Much of the disappointment owes to softer consumer and capital equipment spending," JP Morgan economists wrote in a note to clients.
I'd rate the report a 6 on a scale of 1-10. The good news is retail sales continue to increase. And ex-autos, sales were up .8%. Most impressive, however, were the increases in home improvements/furnishings. Furniture was up 3.6%, electronics were up 2.1% and building materials/supplies were up 2.2%. Also note that food services were up 1%. This data tells us the consumer -- at least so far -- is actually pretty resilient in the face of rising gas prices.