More Mixed Signals on U.S. Economic Front : Recovery: Retail sales inched up in February. Weekly jobless claims hit a four-month high. Some experts say the expansion is slowing.
The half-speed economic recovery is back. Retail sales growth is fading after a strong holiday shopping season, and unemployment lines are stretching longer.
Sales rose 0.3% in February, held in check by a drop at auto dealers, the Commerce Department said Thursday. It revised away a previously reported increase for January, saying sales were unchanged during that month after advancing a strong 1.1% in December.
Meanwhile, the Labor Department said the number of Americans filing new claims for unemployment benefits unexpectedly shot up by 25,000 in the week ended Feb. 27. Claims totaled 376,000, the highest level in nearly four months.
The reports fit with other statistics showing the economy losing some steam this year. Economists, however, were far from alarmed. They said some retrenchment was inevitable after the final three months of 1992, when the economy sprinted ahead at a 4.8% annual rate, the fastest in five years.
“We went way above trend in the last part of 1992 and now we’re getting back to earth a bit,” said economist Robert G. Dederick of Northern Trust Co. in Chicago.
Despite the fact that the unemployment rate in February fell to a 15-month low of 7%, other economic statistics have slipped early this year. Economists surveyed by Blue Chip Economic Indicators of Sedona, Ariz., expect only a 2.9% rate of economic growth in the current quarter.
The slowdown in retail spending, which accounts for about one-third of the overall gross domestic product, is a major reason cited for the muted forecast.
“We’re not in a stronger recovery. This still is the kind of half-speed recovery we’ve been talking about for a long time. It really hasn’t changed,” said economist Sandra Shaber of WEFA Group in Bala-Cynwyd, Pa.
She said sustained improvement in the job market will be the key ingredient needed this year to keep retail sales rising.
In February, sales at building supply and hardware stores jumped 3.3%. Receipts at food stores rose 1.3% and at gasoline stations, 1.6%.
Department store sales rose 0.3%; restaurant sales, 0.4%, and drug store sales, 0.5%.
Auto sales, however, dropped 2.2%. Furniture stores reported a 0.5% decline. Sales at clothing stores fell 1.7%.
Excluding the volatile auto category, sales rose 0.9% in February after a 0.1% decline in January.
Overall, sales rose in February to a seasonally adjusted $167.8 billion, 5.3% higher than a year ago.
Economists said a number of conflicting factors will be influencing consumers in the next few months.
One drag on spending will be lower than expected tax refunds, the result of President Bush’s order last year reducing payroll withholding. Another negative is worry among higher income people about President Clinton’s proposed tax increases.
On the plus side, low interest rates are spurring another wave of mortgage refinancing. That is lowering some homeowners’ monthly payments, giving them more cash to spend.
Retail Sales
Seasonally adjusted, billions of dollars Feb., ‘93: $167.8 Jan., ‘93: $167.4 Feb., ‘92: $159.4
Source: Commerce Department
