In a Surprise, U.S. Retail Sales Rose in February

Business and Finance Career - February was hardly an ideal month for retailers: snowstorms blanketed many parts of the country, and car dealerships faced an uproar over safety concerns. But sales for the month rose solidly, the government reported Friday, raising hopes that the economy would get a lift from more robust spending.

The Commerce Department said retail sales increased 0.3 percent for the month, much better than the 0.2 percent decline forecast by Wall Street analysts. When volatile car and gasoline sales were excluded, the gain was even stronger: 0.9 percent.

“The consumer continues to come out of its shell after the shell-shock of the recession,” said Alan Levenson, an economist at T. Rowe Price. “Employment is falling more slowly, wages are growing modestly, and hours worked are expanding, giving a lift to incomes.”

As the labor market improves this year, economists predict consumer spending will rise slowly, though probably not at a sufficient pace to lead the economy out of its downturn. A separate report on Friday highlighted the timidity of the American consumer. The University of Michigan’s barometer of sentiment fell to 72.5 in the first part of the month, far below the historical average of 86.5 and pre-recession levels of 78.4.

The more stable source of growth, economists say, may come from inventory restocking. Stockpiles remained flat in January, the Commerce Department said in a separate report on Friday, slightly below expectations. But economists said a pickup in inventories over the next several months would likely help sustain the recovery.

“The weaker they are now, the more potential they have,” said James F. O’Sullivan, chief economist for MF Global. “We haven’t used up all the stimulus from inventories yet.”

Retail sales were up across the board: electronics gained 3.7 percent, clothing increased 0.6 percent, and building materials rose 0.5 percent. Even restaurants and bars, which economists believed would be most severely affected by weather, noticed an uptick in sales, with sales rising 0.9 percent.

The government revised January’s data to indicate weaker sales — the gain for the month was 0.1 percent, rather than the 0.5 percent originally reported. Sales have now increased for four of the last five months.

Analysts had expected February’s winter weather, mainly on the East Coast, to take a toll on sales. Car sales were expected to drop significantly because of weather and concerns over the safety of some Toyota vehicles. Toyota was in the midst of a crisis as it tried to fix defects in some of its vehicles and tamp down worries that its cars were unsafe to drive. In the end, car sales fell 2 percent.

The surprise gain underscored a sense that spending habits were changing. The amount of money Americans kept in their savings accounts fell in January, and consumer borrowing increased for the first time in a year.

But high unemployment and large debt burdens continue to constrain household spending. And it is unclear when the labor market will show , with the economy still shedding jobs each month.

“We remain concerned that consumers will stay on the sidelines during this economic recovery,” said a research note from Capital Economics. “Weak jobs growth, low wages growth and tight credit mean that any further acceleration in consumption growth is unlikely.”

Despite those pressures, a report last week showed that the country’s stores posted their strongest results since late 2007, with nearly every major chain showing robust increases.