Americans spending despite slow recovery

NEW YORK – This summer, Americans were walking contradictions: They opened their wallets despite escalating fears about the slow economic recovery and surging gas prices.

A group of 18 retailers ranging from discounter Target to department-store chain Macy’s reported August sales on Thursday that rose 6 percent – the industry’s best performance since March – according to trade group International Council of Shopping Centers. At the same time, the government released numbers showing that Americans spent in July at the fastest clip in five months.

The news appears to show that what Americans say and do are two different things: The reports come two days after a private research firm said consumer confidence in August fell to its lowest level since November 2011 as Americans grew more concerned about the job market, business conditions and the overall economy.

“This is bit of a head scratcher,” said Mark Vitner, a Wells Fargo Securities senior economist. “This runs counter to most of the other data related to the consumer.”

But Roxane Battle Morrison, 50, said there’s a logical explanation for the paradox. The Plymouth, Minn., resident said she is more worried about the economy, but she spent in August for one reason: she needed to help her 18-year-old son Jared get ready for college. So, Morrison, who produces videos for a nondenominational church, put money away every month over the past year to save nearly $1,300 to buy him books, sheets, a futon bed, and other dorm room accessories.

“I was counting every nickel, looking at every price tag,” she said.

Consumer spending accounts for 70 percent of economic activity. And while only a small group of merchants representing roughly 13 percent of the $2.4 trillion U.S. retail industry report monthly revenue figures, the August numbers still offer a glimpse at how Americans are spending.

The revenue gains in August, which only factor in stores that were open at least a year, are better than the 4- to 5-percent increase Wall Street predicted at the beginning of the month. And it was the best performance since March, when stores collectively posted a gain of 6.8 percent. Except for a shopping lull in June, stores have seen a healthy pace of anywhere from 4 percent to nearly 7 percent growth since the beginning of the year. But analysts worry that Americans are only shopping now because they are buying necessities for their children for back-to-school, and that the healthy spending won’t last.

“It’s certainly strong on the surface. But is it a sign of an improving economy and retailing environment? Or is it just more of the same: shoppers were driven by need,” said Michael P. Niemira, chief economist at the International Council of Shopping Centers.

The strong sales reports give retailers some reason to be optimistic as they look toward the busy winter holiday shopping season, the biggest shopping period of the year, in November and December. That’s because Americans were spending despite signs that they’re becoming impatient with the slowly improving economy.

The Commerce Department’s report released Thursday showed consumer spending rose 0.4 percent in July from June, following no change in June and a slight decline in May. Income grew 0.3 percent, matching the gains from May and June.

“The results show that the consumer isn’t dead,” said Ken Perkins, president of Retail Metrics, a research firm.