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The U.S. Department of Commerce released February retail sales this morning, reporting that sales rose an adjusted 0.3% from January and increased 4.1% (unadjusted) from the year-ago period. Analysts had expected the unseasonably cold weather and severe snowstorms across the East Coast to impact performance, but it appears spending held up relatively well. This was the fourth consecutive year-on-year gain after 15 straight monthly declines:
However, the gains are more representative of the extremely easy comparisons from last winter, when overall sales tumbled 8.8%, 8.4%, and 11.6% in December, January, and February respectively. Total sales for the month were still down 8.0% from February 2008 and 1.9% from February 2007. To put in perspective how absolutely dismal 2009 was, consider that in the previous 15+ years, from January 1993 through August 2008, there were a total of only 2 months in which YoY decreases were reported:
For the month, Gasoline Stations (+24.6% YoY / +0.3% MoM) and Nonstore retailers (+12.7% YoY / flat MoM) were among the strongest gainers. Total sales excluding Autos were up 4.6% from last year, while total sales less Autos and Gas Stations showed a 2.5% year-on-year gain. Stores which are highly leveraged to the housing market, including Furniture & Home Furnishings Stores (-1.9% YoY) and Building Materials & Supplies Dealers (-4.4% YoY) continue to struggle and have yet to show meaningful signs of a recovery.
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Another worrying sign is the weak discretionary spending at department and electronic stores. While spending at department stores posted a slight 0.4% gain in February from a year ago, it was only the first monthly increase in 29 months, while sales at electronic and appliance stores dropped for the 19th consecutive month. For all the talk of “pent-up” demand, we have yet to see any recovery in discretionary spending at these stores.
There is no doubt the recent strength in retail is a positive sign, but we are skeptical the gains will continue to hold up. The government has taken extraordinary measures to put money in the pockets of consumers, including unemployment benefits up to 99 weeks, a 65% subsidy on COBRA payments, and a multitude of housing programs to lower monthly mortgage payments. Yet even with all of this support, the recovery hardly looks robust when compared to past post-recession periods.
Indeed, recent confidence survey show consumers are not fully buying into the recovery story. After climbing along with the stock market in the back half of 2009, confidence indices have begun to slip as consumers are still extremely worried about unemployment and their own personal finances.
According to the preliminary March reading, the Reuters/University of Michigan Consumer Sentiment Index slipped to 72.5 from 73.6 in February, and now sits under the level from September ’09. Based on the survey, consumers expect the unemployment rate to stay elevated at 9.7% for all of 2010, and are losing confidence in help from government economic policies.
“(The sentiment reading) really has shown very little variation over the past several months, and that’s mostly because consumers no longer fear unemployment will go up any more, but they don’t expect it to improve very much in the year ahead,” said Richard Curtin, director of the surveys.
January and February are typically the lightest months of the year, and March will benefit from Easter falling a week earlier this year than last. So, we will be focusing on combined March/April results to see if the positive momentum can continue.
Click here for detailed tables and graphs by line of business.
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