March 14, 2013 – February’s retail sales data indicate that consumer spending is continuing to make modest gains, but slowing job growth could threaten to change that, NAFCU Staff Economist Curt Long cautioned.
Total retail sales increased 1.1 percent in February, driven largely by rising gasoline prices. The current level of consumer spending is notable, Long said, because of the expiration of the Social Security payroll tax cut, which has shrunk paychecks.
Long pointed out that the personal saving rate hit its lowest mark in January since the recession began. “That indicates consumers are opting to forego saving for now in order to sustain the current level of spending,” he said.
Core retail sales, which exclude light vehicles and gasoline, increased 0.4 percent in February, while retail sales of auto and gas increased 2.6 percent.
On a year-over-year basis, retail sales increased 4.6 percent, up from 4.1 percent in January. Core retail sales increased 4 percent from a year ago, while auto and gas sales increased 6.2 percent from February 2012.
Gains in the housing and automobile markets have helped increase sales in building materials and motor vehicles and parts stores, Long noted, and continued improvements in these two markets should help retail sales as the year goes on. “Declines in government spending due to the sequestration are expected to be a drag on retail sales as workers are furloughed or laid off in the coming months,” he said.