US retail sales up 0.5%, consumer confidence down

| February 14, 2010 | 0 Comments
US retail sales up 0.5%, consumer confidence down

The Commerce Department has revealed a better-than-expected 0.5% rise in January retail sales compared with the previous month, suggesting a strong economic recovery.

The figures follow on from the 0.1% fall in December but on an annual basis, sales were up by 4.7%.

Retail sales are closely monitored because consumer spending makes up for more than two-thirds of overall economic activity in the US.

Commenting on the figures, Kathleen Stephansen at Aladdin Capital Holdings, said: “It’s a nice surprise for the economy. It suggests that the consumer is willing to spend a little. It tells us that retail sales are in a clear recovery.”

However, analysts believe activity will be weak in February as a result of last week’s severe snowstorms which hit the Middle Atlantic region of the US.

In the meantime, a closely-monitored survey revealed that confidence among US consumers dipped in early February.

The Reuters/University of Michigan consumer sentiment index fell from 74.4 in January to 73.7 in early February.

Some analysts believe that low confidence could mean depressed spending in the short-term.

Paul Ashworth at Capital Economics comments: “We expect that lingering high unemployment, weak income growth, low confidence, tight credit conditions and the continuing need to deleverage will constrain consumption growth for at least this year and possibly well beyond.”

Last month, it was revealed that the US economy grew 5.7% in the final three months of 2009 - the fastest pace in six years and higher than analysts expectations.

However, unemployment remains a worry in the world’s largest economy and concerns of a renewed downturn are having an impact on spending.

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