Improving mood and better weather boost sales
As expected, retail sales climbed 1.0%, the fastest monthly pace since October. Excluding auto and gasoline, the monthly increase of 0.6% is still a solid result.
January sales were also revised notably higher to 0.7%. The combined effect of a strong February result and a solid upward revision in the January number suggest that consumers are emerging from their funk.
Consumer sentiment, which will be released later this morning, is expected to dip slightly, but generally remains in an upward trend. Coupled with rising personal income and signs of recovery in the jobs market, the gradual improvement in consumer confidence should support continued improvement in retail sales.
Should gas prices remain elevated for an extended period as anticipated by many analysts, consumers are likely to have to trim other spending. Nonetheless, that impact may be mitigated to a degree by frugality fatigue and the general sense that the economy is improving.
The unrest in the Middle East and the potential for oil prices to move higher from here remain a major wild card. If international tensions worsen, especially in key oil producing regions, the potential negative impact on sentiment and spending certainly remains a risk.
More broadly, we remain encouraged by the acceleration we’ve seen in several areas of the economy and believe a virtuous feedback loop may well have begun.
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