February Retail Sales Up Less Than Expected
By Caren Bohan
Reuters
WASHINGTON (March 13) - Retail sales rose less than expected in February, the government said Wednesday in a report that added to doubts about the strength of the economic recovery.
Retail sales edged up a seasonally adjusted 0.3 percent last month to $296.41 billion, the Commerce Department said, reversing a matching 0.3 percent decline in January. Economists in a Reuters survey had forecast a 0.9 percent gain for February.
"It is kind of a mixed vision here. It shows consumer spending growing with some vigor this quarter," said Carol Stone, economist at Nomura Securities International Inc. in New York. "I'm surprised that the vehicle category came in so sluggishly. Consumers are continuing to spend."
Sales excluding automobiles rose 0.2 percent in February after a 1.2 percent surge in the prior month. Sales of vehicles and parts rose 0.4 percent.
The data helped temper worries in the bond market that the Federal Reserve may be getting set to raise interest rates in a few months. Inflation-sensitive bond prices were mixed after initially firming on the news.
Spending by consumers fuels two-thirds of total U.S. economic activity so moderate gains in retail sales imply a restrained pace of expansion.
WILL THE FED DROP ITS BIAS?
Some analysts said the retail sales data could help shape debate at the central bank's upcoming March 19 policy meeting.
A number of economists have been predicting that at that gathering the Fed, in the statement it issues after the meeting, may opt to drop language that has emphasized concerns about economic weakness.
The Fed could shift to a more neutral statement, indicating the risks are about evenly balanced between sub-par economic growth and inflation.
While that subtle change in the post-meeting statement -- sometimes referred to as the "bias" -- would have no direct effect on rates, analysts said it could be a signal that the central bank is at least mulling the possibility of reversing some of last year's aggressive rate cuts.
Those cuts have brought the overnight federal funds rate down to 1.75 percent, a 40-year-low.
"If you were fence-sitting on the bias, you'd say after this retail sales report that they aren't going to drop it. But I still think they'll take it off," said Carey Leahey, economist at Deutsche Bank Securities in New York.
FURNITURE SALES SURGE
One of the strongest categories in the retail sales report was sales at furniture and home furnishing stores, which climbed 1.5 percent in February after a 0.3 percent rise in January. The gain was consistent with a trend of robust home sales as new home-buyers typically spend heavily on furnishings after they move in.
Sales at electronics and appliance stores also increased strongly in February. They were up 1.1 percent, bouncing back from a 3.2 percent drop in the prior month.
But clothing sales slowed down from the heady pace they saw in January. Purchases at clothing stores eased 0.1 percent in February after a 1.4 percent rise in January.
The slight 0.4 percent rise in vehicles and parts sales in February came after a plunge of 4.6 percent the previous month. The sharp January decline came on the heels of a huge car-buying spree in late 2001 which had been fueled by zero-percent financing incentives.
In key testimony on Capitol Hill last week, Fed Chairman Alan Greenspan declared that the recession -- which began last March -- had ended but he said there were some indications the pace of the recovery would not be as swift as some other rebounds in the post-World War Two period.
He noted that consumers did not pull back sharply on their spending even amid the recession, which means there may not be the "pent-up demand" to fuel a huge surge in growth that sometimes follows downturns.
09:52 03-13-02
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