Retail sales in the US resumed their growth in January, confounding more dismal expectations and raising the hope that the country could yet avoid a consumer-led recession.
A string of lacklustre sales reports from major high street retailers in recent days had left economists predicting that overall retail sales contracted by up to 0.4 per cent in January from the previous month, but a first estimate by the federal government's Commerce Department, out yesterday, in fact showed a 0.3 per cent rise. It follows the equally expected month-on-month fall in sales in December.
Total spending in January was 3.9 per cent higher than in the same month of 2007, as the US consumer managed not to buckle under the weight of rising mortgage payments, fuel prices and job insecurity.
Economists have been watching retail sector data more closely because they believe that a sharp consumer downturn could be all that is needed to tip the US economy into recession. Many tempered their enthusiasm for the better-than-expected headline number, saying that many categories of item, such as furniture and electronics, did show declining sales.
Others pointed out that the figures are not adjusted for inflation. Kevin Logan, senior US economist at Dresdner Kleinwort, said: "Food and gasoline were up significantly, and that is mostly a price effect. People did not drive more in January, they probably did not eat more – they just paid more for it. Overall, there is a distinct slowing trend in retail spending, and it has been quite sharp over the past six months."
The data prompted a mini-rally by the Dow Jones Industrial Average, which climbed 178.8, or nearly 1.5 per cent, to 12,552.2.
Matthew Moore, economic strategist at Bank of America, said: "On the surface this says: 'Hey, maybe we're not going into recession'. On the other side, it means: 'Hey, maybe the Fed is not going to be that friendly any more'."
With economic signals still mixed, all eyes will turn today to Ben Bernanke, chairman of the Federal Reserve, who is appearing before the Senate banking committee and whose testimony will be scrutinised for clues on whether he plans to argue for still more interest rate cuts. In private meetings with Senators this week, Mr Bernanke has already been expressing his belief that the housing market downturn could begin to ameliorate by the end of the year.Reuse content