Jump in retail sales fuels skepticism

Total sales rose 1% in January versus expectations for a decline, but economists question whether there's really a rebound.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Parija B. Kavilanz, CNNMoney.com senior writer

How effective do you think the Geithner plan to spur lending will be?
  • It's enough to do the job
  • It's a start, but more aid will be needed
  • It won't work

NEW YORK (CNNMoney.com) -- Retail sales unexpectedly rose in January, after six straight months of declines, according to a government report Thursday that raised skepticism among economists.

The Commerce Department said total retail sales rose 1% last month versus a revised drop of 3% in sales in December. December sales were originally reported to have declined 2.7%.

Economists surveyed by Briefing.com on average had forecast a decrease of 0.8% for January.

Sales excluding autos and auto parts rose 0.9% compared to a revised 3.2% drop in the measure in December. December sales minus auto purchases were originally reported to have declined 3.1%.

Economists had forecast a decrease of 0.4% in the measure for January, according to Briefing.com.

Has retail rebounded?

Retail experts were quick to dismiss the rebound.

"These numbers are a little puzzling to me," said Scott Hoyt, senior director of consumer economics with Moody's Economy.com

"The gains in apparel purchases is a bit of a surprise given the numbers we've seen from retailers," he added.

To his point, many specialty clothing chains reported big declines last month in their January same-store sales, a key measure of retail performance that tracks sales at stores open at least a year.

"It's very difficult to interpret this report because it is only one data point. And the [positive] numbers are incongruous with everything else that we know is hurting retailing," Hoyt said.

Hoyt said he wouldn't put "too much faith" into last month's sales increases unless he sees other data supporting the Commerce Department's report.

Also, he said he wouldn't be surprised if January's sales increases were revised lower next month.

Others had a similar reaction as Hoyt to the government's report.

"I talk to retailers every day. There's no way these numbers could be as positive as they were," said Bob Duffy, senior managing director with global advisory firm FTI Consulting.

Duffy said he looks at retailers' monthly same-store sales numbers "to get a better pulse of what is actually happening in the industry."

"I think was happened last month was retailers were trying to generate additional cash. So a lot of merchandise was on clearance," Duffy said.

"The 50%, 60% discounts were driving some consumers to spend, but this can't go on long term. I am not saying something turned [for retailers] last month," he said.

Even the National Retail Federation (NRF), the industry's largest trade group, tempered expectations that retail sales could be recovering after a brutal 2008.

"While 2009 got off to a surprising start, it's going to be difficult for retailers to maintain this momentum," NRF chief economist Rosalind Wells, said in a statement Thursday.

While seasonal increases "were encouraging for retailers, budget-conscious consumers still spent much less this year compared to last January," the group said.

"We expect the first half of the year to present challenges while giving way to sustained growth in the fourth quarter," said Wells.

But Jeff Feinberg, managing director Alvarez & Marsal, a turnaround and restructuring firm, offered a somewhat different perspective.

"Elements of these [numbers] make perfect sense," Feinberg said.

"First, Wal-Mart and other discounters are clearly benefiting from their new consumer base," said Feinberg, referring to more upper income shoppers trading down to Wal-Mart's low-priced goods.

"While department store sales were sluggish, they were not as sluggish as forecasted. Extreme discounting has enabled [more] people to make purchases," he added.

Also, Feinberg said he's noticed that both commercial banks and auto dealers have been loosening up loans to car buyers over the past month. This he feels has helped lift auto sales in January.

The government report showed sales rose across retail categories, including purchases at 2.6% gain electronics sales, a 1.6% increases in clothing sales and a 1.1% increase in purchases at general merchandise stores.

Elsewhere, food and beverage stores logged a 2,1% gain last month, and purchases at gasoline stations rose 2.6%, auto purchases rose 1.6%.

"It is impossible to square these numbers with the unit auto sales data," Ian Shepherdson, chief U.S. economist with High Frequency Economics, wrote in a report Thursday.

The few weak spots, according to the report, included a 1.3% decline in furniture purchases, a 3.2% decline in sales of building materials and a 0.5% drop in sporting goods and hobby stores.

"The underlying trend in core retail sales is still clearly downwards," Shepherdson said. "There is no reason to expect any recovery soon. The headline relief today is welcome but it is unlikely to last."  To top of page

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More
Sponsors

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.