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Surprise rise in US retail sales

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by Kay Mitchell

The US Commerce Department in Washing today revealed some good news for the world’s largest economy after it revealed a 1% increase in retail sales in January – the rise was the first in seven months.

However, while the rise was seen as a glimmer of hope after retail sales plummeted 3% in December, many economists believe the rise is attributed to shoppers being tempted by heavy New Year discounting.

On an annual basis, sales are down 9.7% compared with January 2008, according to the Commerce Department.

Excluding motor vehicles and parts, sales in January gained 0.9%, while petrol sales rose 2.6% as prices continued to decline.

The US economy fell into recession in December 2007, following the housing market collapse and the global credit crisis.

Commenting on the figures, Zach Pandl, an economist at Nomura Securities International in New York, said “It is a bit of a puzzle because consumer fundamentals remain poor. Maybe retailers lured shoppers with aggressive discounting. Still it’s a small piece of good news.”

Last week, figures published by the US Labor Department revealed that the rate of unemployment in the US rose from 7.2% in December to 7.6% in January – the highest level since 1992.

The sharp rise in job losses and falling house prices have had a major impact on consumer spending, which makes up for about two-thirds of US economic activity.

Across the Atlantic, figures released earlier this week from the British Retail Consortium revealed UK like-for-like retail sales in January rose 1.1% compared with a year earlier.

As with the US, the rise in the UK was also attributed to heavy discounting.

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News posted: February 12, 2009

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