March 12, 2009
A SLIM REED OF HOPE...MAYBE
It's hard to look ahead by looking back, but since there's no alternative it's everyone's favorite sport.
So it goes in economic forecasting. We're all reliant on yesterday's numbers. Beggars can't be choosy, but they're always busy, which brings us to this morning's update on retail sales for February. The news isn't good, but it's not necessarily getting worse, or so it appears. For the moment, that constitutes progress and perhaps even reason for hope.
As our chart below shows, retail sales contracted in February by a slight 0.1% on a seasonally adjusted basis. That's no reason to cheer, but it's a heck of a lot better than the steep 1%-3% monthly drops in the last four months of last year.
January's 1.8% advance for retail sales suggested that maybe the bleeding had stopped, although that idea is again on the defensive in light of last month's modest setback.
Although no one thinks consumer spending is poised for a roaring comeback any time soon, there's still reason to think that the worst of the declines in retail spending is behind us. One reason is that while sales overall slipped last month, a few corners managed to post gains.
Electronics and appliance stores reported higher sales by 1.7% last month on a seasonally adjusted basis. Meanwhile, furniture and home furnishings eked out a 0.7% rise in February. Clothing stores and general merchandise establishments were also higher on the month.
Encouraging, but it's still much too early to draw conclusions. Sales could just as easily take a general turn down again in the coming months given the depth of the current economic troubles. In fact, the limited bright spots last month may simply be a temporary bout bottom fishing as consumers snap up goods at bargain prices born of the recession.
It's going to take quite a few more months to convince this editor that something approaching stabilization has arrived in retail sales. Even then, it's a long way to expecting a sustained rebound in consumer spending. The economy is still suffering and consumers are wary, and they're likely to remain wary for the foreseeable future.
Indeed, today's news on initial jobless claims reminds that the outlook for the labor market remains troubling. New filings for unemployment benefits rose by 9,000 to 654,000 last week, a sign that the economy is still under quite a bit of negative stress. The health of the labor market is closely tied to retail sales so until we also see some signs that the job less is at least slowing, no one should expect much for the retail industry.
That said, maybe, just maybe, there's a bottom in sight for retail sales. Deciding if today's numbers are a down payment on that hope will take time, and much depends on what happens next in the labor market. But the first step in a 1,000-mile journey has to start somewhere.
Posted by jp at March 12, 2009 10:09 AM