- The Washington Times - Thursday, October 15, 2009

Retail sales outside of the automotive industry showed surprising strength in September, but economists worry the rebound in all-important consumer spending will be short-lived as American families contend with rising unemployment and tight credit.

Excluding the auto sector, sales rose by a better-than-expected 0.5 percent, led by gains at furniture stores, general merchandise stores and specialty clothing stores.

Many economists saw it as a sign that Americans are starting to spend again, a critical development for any recovery because consumer spending accounts for 70 percent of U.S. economic activity.

“American consumers look like they are making their way back. They are cautious but they are no longer panicked,” said Mark Zandi, chief economist at Moody’s Economy.com. “They are not spending with abandon, but they are spending enough to ensure that the nation’s recovery will continue.”

Retail sales actually fell 1.5 percent last month, the Commerce Department said Wednesday, a plunge that reflected the end of the government’s popular “cash for clunkers” program. Still, that drop was less than the 2.1 percent fall that economists expected.

Sales at gasoline stations jumped by 1.1 percent last month. Even with recent increases, gas prices are still well below the peaks of 2008. Compared with September 2008, consumers spent an estimated $3.25 billion less per week to gas up their cars, giving them money to spend elsewhere.

Those margins have begun to narrow because at this time last year, retail gasoline prices were in free fall. Prices right now have stabilized around $2.50 per gallon. Still, Americans are spending $1.8 billion less per week now on gasoline.

But economists cautioned that consumer spending is unlikely to jump in coming months as households contend with rising unemployment, which now stands at a 26-year high of 9.8 percent, as well as tighter standards on bank loans and credit cards.

The national jobless rate is not expected to peak until reaching 10.3 percent or higher next summer.

“With household finances likely to remain constrained by falling employment, declining real incomes and tight credit, we doubt that consumption will continue to grow at such rates,” said Paul Dales, an economist at Capital Economics.

Copyright © 2019 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.

 

Click to Read More and View Comments

Click to Hide