U.S. consumer spending showed some unexpected resilience in April, suggesting the economy may be stronger than some had predicted.þþThe Commerce Department's April retail-sales data released Tuesday ÿcontradict the conventional wisdom that holds that high energy costs are discouraging consumer discretionary spending,ÿ said Nomura Securities economist David Resler.þþBecause consumer spending makes up more than two-thirds of the economy, retail sales data are a closely watched measure of economic health. þþThe report did show, however, that in a weak economy, Americans are shopping more at discount-oriented general merchandisers such as Wal-Mart and cutting back on visits to costlier department stores.þþOverall, retail sales fell 0.2 percent last month, in line with economists' forecasts. But that downturn is almost entirely due to a 2.8 percent drop in auto sales. þþRetail sales excluding vehicles rose 0.5 percent for the month, topping the 0.2 percent consensus forecast—surprising many analysts.þþEconomists who believe the economy has already entered a recession cautioned against interpreting April's retail-sales figures as a harbinger of better times. They argued the labor market is deteriorating, housing prices are tanking and surging gasoline costs are robbing Americans of money that might otherwise be spent on consumer goods. þþThe April retail data ÿprobably raised a few eyebrows among those who counted consumers out this year,ÿ said Economic Outlook Group economist Bernard Baumohl. But the bottom line, he said, ÿis that the April bounce in household expenditures should not be construed as evidence consumers have resolved their financial woes.ÿþþStill, the gains were broad-based: Apparel sales climbed by 0.7 percent, sporting goods sales rose 0.4 percent, and sales at electronics stores climbed 1.4 percent. Sales at food stores were up 0.5 percent, and sales at restaurants and bars rose 0.9 percent; outlays in those categories were inflated by big increases in food costs, experts said. þþThe report also underscored consumers' thriftiness: While sales at general-merchandise stores such as Wal-Mart and Target rose by 0.5 percent, spending declined by 0.1 percent at department stores, a pricier category. þþThe stronger-than-expected retail-sales report ÿwas the result of higher promotional activity by many retailers,ÿ along with better weather, said Sanford Bernstein analyst Uta Werner. But consumers still face economic ÿhead winds,ÿ Werner said, and ÿWe continue to believe that the recessionary consumer environment will drive slow retail sales growth in the coming months.ÿþþConsumers may have more money than expected to spend on such goods because they're steering clear of the gas pump. Even though gasoline prices were up substantially, sales at gas stations declined. ÿConsumers seem to be cutting back on driving instead of crimping other spending,ÿ said BMO Capital Markets economist Michael Gregory.þþRising food prices may be inflating the sales data a bit, Gregory said, but, ÿconsumers still appear prepared to keep spending as long as deals can be had and Uncle Sam foots some of the billÿ via the tax-rebate program. þþThe economic stimulus rebates are expected to give the economy a jolt during May and June, he said, but most experts think that effect will fade by late summer. þþFirstTrust Advisors economist Brian Wesbury has a more positive take on the economy than many analysts. The retail data offer confirmation, he said, that ÿthe U.S. is not in recession now and is not going into one in 2008.ÿþþThe argument for a recession this year has always depended on a sharp slowdown in consumer spending, Wesbury noted, ÿbut the data show consumer spending remains resilient.ÿþþ
Source: Chicago Tribune
