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Retail sales show a surprising increase in February

Jobs, wage hikes needed to sustain gains, some say

By Martin Crutsinger
Associated Press / March 13, 2010

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WASHINGTON — Retail sales posted a surprising increase in February as consumers refused to let snowstorms stop them from stepping up purchases for everything from clothes to appliances. The improvement provided hope that the economic recovery is gaining momentum.

Some economists cautioned that spending increases will remain modest as long as wages stay flat and job creation weak. But others said the fourth gain in retail sales in five months means consumers are starting to spend with more confidence.

“This is more than a one-month wonder,’’ said Stuart Hoffman, chief economist at PNC Financial in Pittsburgh. “This is telling us that consumers, who had been tightening their belts throughout the recession, have now loosened them a notch.’’

For February, sales rose 0.3 percent, the Commerce Department said yesterday. That surpassed expectations of a 0.2 percent decline.

The overall gain was held back by a 2 percent decline in auto sales, partly reflecting the recall problems at Toyota. Weakness in autos also caused a downward revision in January retail sales. They were reduced to an increase of just 0.1 percent, down from the 0.5 percent originally reported.

But outside of autos, sales rose a strong 0.8 percent in February. That was far better than the 0.1 percent rise economists had expected. And for January, excluding autos, sales gained 0.5 percent, just slightly below the 0.6 percent initial estimate.

Some analysts expressed concern about whether the spending gains can be sustained, given that unemployment remains high — 9.7 percent in February — and consumer confidence shaky.

A separate report yesterday showed that consumer confidence dipped to 72.5 in early March, down slightly from a February reading of 73.5, according to a Reuters-University of Michigan survey.

Economists said spending in both January and February likely gained support from higher tax refunds and tax credits paid by the government during the current tax filing season.

Those increases reflect some of the tax relief included in the $787 billion economic stimulus package Congress passed last year.

The February retail sales report showed widespread improvement.

Sales at general merchandise stores, the category that includes department stores and big discounters such as Wal-Mart Stores Inc., rose 1 percent after a 1.3 percent rise in January.

Sales at appliance stores were up 3.7 percent. Sales at hardware stores rose by 0.5 percent. Furniture sales gained 0.7 percent.

Restaurants and bars enjoyed a 0.9 percent advance, their biggest gain in nearly two years.