Retail Sales Rise 0.6 Percent in January, U.S. ReportsBy Jesus Sanchez
and Marilyn Yaquinto
Los Angeles Times
In an encouraging report that hinted at a budding economic recovery, the U.S. government said Thursday that retail sales in January rose 0.6 percent -- a much stronger showing than expected and the largest increase in eight months.
Some economists, however, cautioned that the gains might represent a temporary rebound in consumer demand rather than the harbinger of a more vigorous recovery. The increase is also measured against the weak results of January 1990, when the Persian Gulf war depressed sales at major retailers.
Still, many hailed the most recent retail sales results as signaling a possible reversal in sagging consumer confidence. Retail sales make up about half of consumer spending, which accounts for two-thirds of the nation's economic activity.
"This shows signs of life in consumer spending," said Allen Sinai, chief economist with the Boston Co. Economic Advisors. "The key to the turnaround may be stirring."
In another promising report Thursday, the Department of Labor said jobless claims recorded a second consecutive weekly decline, with 437,000 Americans making first-time visits to unemployment offices for the week ending Feb. 1.
The number of Americans filing initial claims for jobless benefits dropped by 13,000 from the previous week's mark of 450,000, the Department of Labor said.
The Department of Commerce report on retail activity in January showed that sales rose to a seasonably adjusted $153.5 billion, up from a revised $152.7 billion in December, which proved to be a weak holiday shopping season. It was the biggest increase since sales jumped 1.2 percent last May.
Tracy Mullin, president of the National Retail Federation in Washington, said the retail report represents "a very hopeful sign of the future."
She attributed the sales gains to a combination of lower interest rate s, improving consumer confidence, and efforts by President Bush and Congress to do something to stimulate the economy. Improvement in retail sales is essential to a recovery from recession.
"Consumer confidence is really the key," Mullin said. "Everything seems to be building toward an optimism about the economy."
However, consumers continue to express deep worry about the economy. An ABC News-Money magazine poll released Thursday showed 93 percent of Americans view the economy's prospects negatively.
Still economists also took heart in the revised sales figures for December and November. Instead of declining 0.4 percent in December as originally reported, sales actually edged up 0.1 percent. During November, sales remain unchanged instead of falling 0.5 percent in initial statistics.
The revisions boosted overall sales in 1991 by 0.8 percent, rather than the 0.7 percent increase reported last month. Still, it was the smallest advance since sales were unchanged in 1961.
Department stores reported the large gains, with sales moving up 2.1 percent after declining 1.6 percent in December. Building material and hardware store sales rose 5.4 percent on top of a 1.1 percent increase the previous month.
Sales of automobiles and other durable goods -- products expected to last more than three years -- advanced 0.5 percent following a 0.2 percent gain a month earlier.
Separately, automakers Thursday reported sales of North American-made cars and light trucks surged 22.7 percent during early February, offering some tentative hope that U.S. consumers are beginning to feel more confident about buying. But the news was tempered by Ford Motor Co.'s record $2.3 billion loss in 1991.
John Tuccillo, chief economist for the National Association of Realtors, said he was looking for other statistical indicators to corroborate signs of accelerating recovery: income growth, increased housing starts, stronger auto sales, and a continuing stock market rally.
"The stock market is providing a very clear message," he said. "Its recent run-ups are saying we'll be in a recovery by mid-year."
The stock market hit new highs this week but Thursday suffered a setback as interest rates rose and hopes dimmed for new credit-easing steps by the Federal Reserve. The Dow Jones average of 30 industrials fell 30.18 points to 3,246.65.
Investors have been anticipating a new move by the Fed to ease lower interest rates. But Thursday's positive reports on retail sales and unemployment claims may lessen the need.