August retail spike leaves experts wary
WASHINGTON – Retail sales jumped in August by the largest amount in more than three years, but economists warn that as long as credit stays tight and jobs remain scarce, Americans probably aren’t ready to spend in force again.
Underscoring just how fragile the economic recovery is, Best Buy said Tuesday that customers are spending less in its electronics stores, and Kroger said grocery shoppers are still buying only what they need for the next week, or even the next meal.
The gains for August included a big jump in auto sales, mostly from the government’s recently ended cash for clunkers program. Retail sales overall rose by a seasonally adjusted 2.7 percent, the largest gain since 2006, the Commerce Department said.
Economists were cautious.
“We need more data to see if this is sustainable or just noise,” Ian Shepherdson, chief U.S. economist at High Frequency Economics, wrote in a research note. “The income and credit constraints on consumers remain intense.”
Auto sales were up 10.6 percent, the biggest gain in almost eight years, mainly because of the recently ended clunkers program. Gas station sales increased 5.1 percent, as prices at the pump rose.
Excluding those two categories, sales rose 0.6 percent – still the best performance in six months.
“That’s a pretty good rate – if it was sustained,” said Brian Bethune, chief U.S. financial economist at IHS Global Insight.
Consumer spending accounts for about 70 percent of the nation’s economy. Analysts note that Americans are saving more even as their incomes stay flat. If they don’t consistently spend more, the economic recovery could weaken next year.
Bethune said retail sales last month were helped by tax holidays in several large states, including California, Texas and Florida, and school openings were delayed in some places because of budget constraints. Both factors probably pushed some back-to-school sales from July into August, giving that month’s sales figures a lift, he said.
The recession has cut so deeply that even as retail sales show signs of life, they remain substantially below levels of a year ago.
Kroger Co., the nation’s largest grocery chain, said shoppers are showing signs of running out of money by the end of the month. They’re also trading down even among store brands, increasingly choosing the cheapest option.
Store traffic is up slightly at Best Buy Co. Inc., but it, too, said shoppers are spending less. The company raised its conservative sales and earnings expectations but said the weak economy would keep a lid on spending.
Even though it was helped by the bankruptcy of Circuit City, Best Buy’s U.S. sales at stores open at least 14 months, a key indicator, still fell 3.1 percent.
“Consumers are nervous, and are looking at every purchase with equal importance, from the large-ticket items to what they’re eating for lunch or dinner,” said Doug Conn, managing director of New York-based Hexagon Securities.