U.S. Economy: Sales Rise as Buyers Overcome Snow, Job Concerns

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By Bob Willis and Courtney Schlisserman

March 12 (Bloomberg) -- Americans braved blizzards and overcame job concerns to propel retail sales in February, pointing to a broadening in growth that will help sustain the expansion.

Purchases unexpectedly climbed 0.3 percent, the fourth gain in the past five months, Commerce Department figures showed today in Washington. Another report showing consumer sentiment dropped in March for the second consecutive month represented a risk to the improvement in sales.

“The spending numbers look pretty impressive, especially considering they must have been held down a little at least by the snowstorms,” said James O’Sullivan, global chief economist at MF Global Ltd. in New York. “It adds to evidence that the recovery is gathering pace.”

Macy’s Inc. was among retailers that beat estimates last month as customers bought Valentine’s Day gifts and spring merchandise, indicating consumers will contribute more to the economy in coming months. The loss of 8.4 million jobs since the recession began in December 2007 and mounting foreclosures have shaken confidence, one reason some analysts anticipate households will not lead the economic rebound.

The Reuters/University of Michigan preliminary report for March showed its index fell to 72.5 from a final reading of 73.6 in February. The index was forecast to rise to 74, according the median estimate in a Bloomberg News survey of 68 economists.

Jobs, Spending

“Spending will be holding up relatively well for the remainder of this year but it is not going to come roaring back until we get the jobs necessary to lower the unemployment rate,” said Ryan Sweet, an economist at Moody’s Economy.com in West Chester, Pennsylvania.

Stocks fluctuated between gains and losses as the unexpected drop on confidence offset the gain in sales. The Standard & Poor’s 500 Index fell 0.1 percent to 1,148.80 at 12:34 p.m. in New York. The S&P Supercomposite Retailing Index climbed 0.3 percent.

Retail sales were projected to fall 0.2 percent, according to the median estimate of 77 economists in a Bloomberg survey. Forecasts ranged from a decline of 1 percent to a 0.9 percent gain. The Commerce Department revised January data down to show a 0.1 percent increase compared with an originally reported 0.5 percent gain.

Sales excluding autos rose 0.8 percent, exceeding all estimates of economists surveyed.

Not ‘Disruptive’

“The storms were apparently not quite as disruptive as anticipated,” said Adam York, an economist at Wells Fargo Securities LLC in Charlotte, North Carolina, whose forecast for a 0.6 percent gain excluding autos was the highest of those surveyed. “As we start adding jobs in the spring, employees will gain income and hours and retail sales should follow.”

Inventories at U.S. businesses were little changed in January as sales climbed, signaling companies may need to increase orders to prevent shelves from emptying, other figures from the Commerce Department showed today.

Excluding autos, gasoline and building materials -- the retail group the government uses to calculate gross domestic product figures for consumer spending -- sales increased 0.9 percent after a 0.6 percent gain, today’s sales report showed. The government uses data from other sources to calculate the contribution from the three categories excluded.

Ten of 13 major categories showed increases in sales last month, led by electronics and appliances stores, and grocery stores. Receipts at bars and restaurants climbed 0.9 percent, the most since April 2008.

Spending Broadens

“Consumers are becoming comfortable with spending for what they want, not just what they need,” Christopher Low, chief economist at FTN Financial in New York, said in a note to clients. “This isn’t the bare bones spending on necessities we saw through much of last year.”

TJX Corporation Inc., an off-price apparel chain, last week reported a 16 percent sales increase in the four weeks ended Feb. 27 from a year earlier.

“We achieved these sales despite the harsh snowstorms that affected many regions in the country,” said Sherry Lang, vice president for investors, in a teleconference on March 4. “The month ended on a stronger note than we had anticipated.”

Auto sales weakened, dropping 2 percent after decreasing 1.5 percent in January. The storms that pushed seasonal snowfall totals to records in parts of the eastern U.S. made some dealers lots impenetrable, while a recall by Toyota Motor Corp. may have also hurt auto demand.

Payroll Data

Figures last week that showed the economy lost fewer jobs than anticipated last month signal employment is on the verge of accelerating, a development that would spur spending in coming months.

The Labor Department reported March 5 the economy lost 36,000 jobs in February, including job losses caused by the blizzards. The unemployment rate held at 9.7 percent for a second month, indicating the labor market is stabilizing.

The storms probably had less impact on sales than payrolls, economists said. The government sales figures represent data over the entire month while the employment figures are based on surveys that reflected employment during the week of one of the snowstorms.

The sales figures are “a good reason to feel more confident that payrolls fell in February only because of the snowstorm,” said FTN’s Low. Economists at Morgan Stanley in New York are among those anticipating employment will jump by about 300,000 this month.