Economists Say Latest Reports Show Recession Bottoming Out
Reports on consumer prices and retail sales released by the government Tuesday prompted economists to say the nation’s economy is approaching a turning point and the recession is nearing an end.
The Labor Department reported that consumer prices moved up a mild 0.2% in April after a slight 0.1% decline in March. In the Los Angeles metropolitan area, the index rose 0.7%. The local figures are based on a smaller sample and frequently are more volatile.
Meanwhile, the Commerce Department estimated that retail sales in April declined 0.1% but increased 0.4% in March. Earlier, the department had reported a 0.8% drop in March sales, and economists said the correction was further evidence that the recession was bottoming out.
They noted that retail sales increased 2.2% in February, and the small April decline was mostly in food and fuel. Sales of big-ticket durable goods items--including autos and trucks, home furnishings and building materials--rose 0.6% in April after a March increase of 1.3%.
Economists looking at both reports pronounced them generally in line with expectations and typical of the late stages of a recession.
“Both of these figures are consistent with an economy in the process of bottoming,” said Irwin L. Kellner of Manufacturers Hanover, New York. “Prices are up only slightly, and there is some firming of demand, and sales are beginning to look a little healthier.”
“Everything we’re seeing this week suggests that the economy is bottoming out,” said Donald Ratajczak of Georgia State University in Atlanta. He referred not only to Tuesday’s news, but to Monday’s report that industrial production increased 0.1% in April after falling for six consecutive months.
“You generally get mixed signals when you’re about to get a turn,” he added.
In the inflation report, the Labor Department recorded a 0.7% increase in food costs, due in large measure to a weather-related 15.4% surge in the retail price of fresh vegetables. However, energy prices declined 0.6% in April after falling 5% and 7.1% the previous two months. Excluding food and fuel, core inflation in consumer prices was 0.2%.
Kellner said retail sales for February through April in aggregate rose 2.5%, compared to a drop of about 3% in the three-month period ending in January. General merchandise store sales were up 3% since January, compared to a drop of 0.6% in the earlier three-month period.
Most dramatically, Kellner said, auto sales have swung from a drop of 8.4% in the November-January period to a 7.6% increase in February-April.
In separate reports of auto sales in early May, U.S. car makers reported a 16.9% drop from the same period last year. Nine of the 10 major U.S. auto makers reporting sales figures for the May 1 to May 10 period said their cars and trucks sold at an average daily rate of 23,673 units, compared to 28,263 vehicles a day during the same time last year.
Car and light truck sales have been off for months. Typically, the auto industry is the first to feel the effects of a recession and the last to recover, and it appears that trend is continuing in this current economic downturn.
Still, to Roger Brinner of DRI/McGraw Hill, the government’s retail sales report in particular was “a substantial sign that the economy is near a turning point.” He explained that the strong March-April turnaround in sales of clothing, appliances, hardware and even autos was a good indication that consumers, while cautious, are regaining the confidence to buy--so long as the price is right.
As for prices, the consumer price report for April was a strong reminder that slowing inflation is one of the major self-corrections a recession imposes on an economy over time.
“I don’t see any breaks in trend here,” Brinner said. “Inflation for all items was fairly moderate, and it continues the relief we have been getting on oil prices. This should tell the Federal Reserve it can focus on curing the recession rather than worrying about inflation.”
Brinner said DRI is now projecting inflation measured by the consumer price index to rise only about 3% in the year ending in December.
The April figures brought the overall consumer price index to 135.2% of its 1982-1984 base, meaning that it cost $135.20 to buy the same goods and services at retail that cost $100 seven years ago.
Consjumer Price Index Rises April, ‘91: +0.2% March, ‘91: -0.1% April, ‘90: +0.2% Source: Labor Department
Retail Sales Dip Seasonally adjusted, billions of dollars: April, ‘90: $148.8 March, ‘91: $151.7 April, ‘91: $151.5 Source: U.S. Dept. of Commerce
