WASHINGTON — Consumers opened up their pocketbooks and went on a spending spree in July, fueling the strongest monthly growth in apparel, accessories and department store sales this year.
Retailers benefited from intense promotional activity, newly passed tax cuts and home refinancing gains despite dramatic job losses and a high unemployment rate, according to economists.
Sales at apparel and accessories stores rose 0.8 percent in July against June on a seasonally adjusted basis to $14.87 billion, according to the Commerce Department’s monthly retail sales report. On a year-over-year basis, sales at apparel and accessories stores showed their strongest gain since February 2001 with a 4.8 percent increase, according to Steve Spiwak, an economist at Retail Forward.
“It’s a tug of war that keeps switching back and forth,” Spiwak said. “Earlier in the year people were worried about jobs, but in the last month unemployment claims have fallen and that coupled with a strong housing market and record refinancing in June gave consumers more confidence to go out and open up their wallets.”
He also attributed the sales growth to a rise in consumer demand and promotional activity.
Department store sales, excluding leased departments, rose 1 percent in July to $18.34 billion. Compared with July 2002, department store sales fell 2.2 percent, but it was still the strongest year-over-year showing all year, according to Spiwak.
Meanwhile, sales at general merchandise stores rose 1.1 percent in July to $39.74 billion. Sales in the sector rose 4.9 percent over a year ago.
“It says happy days are here again,” said Carl Steidtmann, chief economist at Deloitte Research. “We have had a whole host of issues in favor of consumers, including tax reductions, unbelievable mortgage refinancing, good wage growth and some initial signs of improvement in the labor market as unemployment claims come down.”
Consumer spending accounts for two-thirds of all economic activity and the economy and employment situation will be key campaign issues in next year’s presidential election.
President Bush met with his top economic advisers Wednesday to reportedly create a campaign strategy to counter Democratic attacks on his economic policy. Bush told reporters at his ranch in Crawford, Tex., after the confab that included Commerce Secretary Don Evans and Labor Secretary Elaine Chao, the administration is “optimistic” about job creation in the coming months despite a high unemployment rate, which stood at 6.2 percent in July.“We believe the tax-relief plan will have a very positive effect on economic growth and vitality,” he said.
On Tuesday, a group of leading economists held a teleconference call for reporters and condemned Bush’s economic policies, claiming the economy is still stagnant.
The overwhelming consensus among the economists was that tax cuts won’t stimulate the economy in the long run, and the employment situation — experiencing the most severe contraction since the Great Depression — won’t improve for many months.
“Bush’s economic policy is by far the worst policy over the past 200 years,” said George Akerlof, a Nobel Prize winner and professor of economics at the University of California.
He said Bush’s policies will create one of the deepest deficits in history, an estimated $6 trillion in the next 10 years.
Meanwhile, in the overall economy, retail sales rose by 1.4 percent, marking the biggest increase in four months. Sales in July were driven by home goods, electronics and furniture, according to Spiwak. In addition, retail sales for June were revised upward, which points to two months of solid sales growth.
Spiwak said the big question is whether retailers can sustain the growth in the fall. He expects retailers to post gains in August as parents take advantage of tax rebate checks and refinancing.
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