Cash registers in January rang up continuing consumer confidence
Consumers are still confident about the economy. The amount of buying they are doing seems to prove it. January retail sales were up 2.2 percent from December, and up 13.1 percent compared with the same time a year ago, according to figures released by the Department of Commerce Tuesday.
''Consumer spending is still pretty positive,'' says Sandra Shaber, an economist at Chase Econometrics, a forecasting firm. And, she explains, it looks as if it will stay that way for a while because of rising incomes, continuing job growth, and modest inflation.
The news comes as a relief to those who were concerned over December's surprisingly low increase of only 0.1 percent from November sales. While shoppers spent heavily on apparel in December, giving department stores a boost, they overlooked the rest of the retail industry. Economists also say that mechanical factors, like bad weather and selling days lost because of the way the holiday fell, were probably contributors to the minuscule upturn in what should have been the biggest selling month of the year.
One reason January looks so good is auto sales. They weren't just a big deal, ''They were a huge deal!'' says John Hammond, a consumer economist at Data Resources Inc., another forecaster, in Lexington, Mass. Car sales for the month were the strongest they've been in four years. ''They aren't leading overall retail sales, but they are finally beginning to catch up,'' he adds.
Mr. Hammond also says strong consumer spending will have a political effect. ''The Federal Reserve's constant worry is about inflation. And the early signal of inflation is an overly expansive economy . . . It (strong retail sales) will only reinforce the Fed's recently stated view: that it won't let up on credit reins.''
But he also believes the Fed won't ''overreact'' or look just at retail sales , but will be more interested in overall consumer spending figures. Those figures should give the Fed a broader picture, including money spent on services and energy.