GOV’T REPORT: RECESSION LINGERS
Byline: Kristi Ellis
WASHINGTON — The economy is having recovery pains.
Soft retail sales across the board in February reflected the weak spending climate, economists said of the Commerce Department’s report on Wednesday.
“If you look at the expectations just two weeks ago, [analysts] thought we were out of a recession and people would spend money like crazy,” said Rajeev Dhawan, director of economic forecasting at Georgia State University. “These numbers did not show that. They showed people are still subdued and we are on the way to recovery, but it’s not right now.”
Sales at department stores, excluding leased departments, posted the biggest seasonally adjusted decline in February, a 0.3 percent dip to $20.48 million, while sales at apparel and accessories stores in February dropped 0.1 percent to $14.59 million. General merchandise stores posted the only gain in February against January, with a 0.4 percent increase to $36.5 million.
“The overall economy is not bad, but the soft-goods side continues to suffer,” said Ira Kalish, chief economist at Retail Forward Inc. “Part of the reason is there has been, over the last year, a fairly substantial decline in short-term interest rates, which has convinced people to refinance mortgages and spend money on home improvements.”
Consequently, there has been a “disproportionate” share of the increase in consumer spending going to home-related products, particularly by baby boomers, Kalish said. On top of that, consumers are buying more apparel at discounters and less at specialty and department stores.
Kalish said some major retailers have “gotten the fashion wrong,” which also contributes to weaker retail sales.
Disappointment in the retail sales report contributed to a 1.2 percent in the Dow Jones Industrial Average, which finished the day down 130.50 points at 10,501.85.
Compared with year-ago levels, retail sales across the board posted healthy seasonally adjusted gains. Sales at general merchandise stores gained 6.7 percent year-over-year, while department store sales, minus the leased departments, rose 4.8 percent, and apparel and accessories store sales rose 0.5 percent.
Meanwhile, overall retail sales in February rose 0.2 percent, reflecting strong home furnishings and electronics sales. Compared with year-ago levels, overall retail sales rose 2.5 percent.
“Basically, the economy is coming along and the damage is not as bad from [Sept. 11] as some had thought,” Dhawan said. “At the same time, however, it is not a rolling recovery because consumers are being cautious.”
Michael J. Donnelly, a senior economist at the WEFA Group, noted, “We do think an expansion is going on, albeit a slow one. If you don’t have a deep recession, you don’t have a strong pickup.”
Kalish said retailers will have to compete on market share more than ever this year.
“I expect to see mergers among specialty chains and department stores and more bankruptcies among smaller- and medium-size chains,” he said.