By  on March 12, 2009

WASHINGTON — Retail sales resisted generally dismal economic conditions for the second month in a row, but economists said stores still face major hurdles to recover from negative year-over-year trends.

Sales at specialty stores in February increased 2.8 percent from January and department stores gained 1.1 percent for the month, the U.S. Commerce Department said Thursday.

But compared with a year ago, specialty store sales declined 3.1 percent to $18.23 billion, while department store sales dropped 5.4 percent to $16.15 billion.

All retail and food service providers reported a seasonally adjusted decline of 0.1 percent in February compared with the previous month. Compared with a year earlier, sales tumbled 8.6 percent.

The retail sales change for January compared with December was revised upward to an increase of 1.8 percent from a previously reported uptick of 1 percent.

“It’s a decent looking report on retail sales,” said John Lonski, chief economist at Moody’s Investor Services. “This may be an early indication that we’re beginning to form a definitive bottom for consumer spending and that perhaps we might be out of recession by summer. The consumer means everything to the U.S. economy. These are not horrible numbers.”

If the trend continues to improve, it could indicate a narrowing of the year-to-year contraction, Lonski said. While unemployment claims have continued to increase, the improved retails sales report is a reminder that “not all households are subprime,” he said. February marked the second month that retail sales have shown some resilience, but not all economists see reason for hope in the numbers.

The relatively positive news about sales helped to elevate retail stocks, which managed their third consecutive day of advances as the S&P Retail Index jumped 3.4 percent to 259.06. Also extending their streaks to a third day, the Dow Jones Industrial Average reclaimed the 7,000 plateau, rising 3.5 percent to 7,170.06, and the S&P 500 made it back just above 750 after rising 4.1 percent.

“The nice little bounce in January and February for apparel is welcome, very welcome,” said Charles McMillion, president and chief economist at MBG Information Services. “But I suspect that it’s principally the result of deep, deep, deep discounting from retailers that had awful sales in October, November and December. I am anticipating weak sales ahead. This is inventory reduction, if not going-out-of-business sales and discounting reflected in the receipts.... I suspect that this means when we get information about the first quarter that retailer profit was severely cut.”

Rosalind Wells, chief economist for the National Retail Federation, said the retail sales growth in February was surprising. “While we are seeing some growth in consumer spending,” Wells said, “it remains to be seen whether this trend will continue. Given the state of the economy, NRF is still expecting year-over-year sales declines through the first half of the year with a slight turnaround at the end of 2009.”

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