Retail sales: Not awful, but hardly great

Consumers are showing some signs of life, but as job losses mount, don't look for their spending to continue.

Published March 12, 2009 3:23PM (EDT)

"U.S. Retail Sales Offer Glimmer of Hope," reported the Financial Times. While falling 0.1 percent in February, reported the Wall Street Journal, they performed "much better than expected."

And yet at the same time, new unemployment claims bounced back up, and "the number of people staying on benefit rolls rose in the previous week by 193,000 to a record 5.317 million," reported Bloomberg News.

So what about that "glimmer" of hope? Both the FT and the WSJ ended up quoting the glum analysis of Ian Shepherdson, chief U.S. economist at High Frequency Economics, who wrote in a research note to clients that the unemployment figures do not augur well for continued "stabilization" in retail spending.

"The steady increase suggests that the rate of decline of payrolls is likely to accelerate further, putting yet more downward pressure on aggregate incomes. It's impossible for people to deleverage when incomes are falling, without reducing their spending significantly; the recent gains in core retail sales cannot last."

Stock market investors, however, don't seem to be reading much past the headlines. The Dow was up over 100 points in morning trading, suggesting that even a false glimmer is enough to spawn some irrational exuberance, in these trying times.

By Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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