Retail sales slumped in February for the third straight month, disappointing economists who had expected consumer spending—the backbone of the U.S. economy—to drive strong first-quarter growth.
“The surprising weakness in today’s retail sales report calls into question the actual state of the consumer in the first quarter and helps moderate somewhat the unmitigated optimism about the state of the economy’s forward momentum,” Anthony Karadakis, chief economic strategist for Miller Tabak wrote in a note to clients.
Still, even as consumers held their wallets tight through the start of the year, there are signs they might start to spend more this spring. Here are five reasons why:
1. It’s the weather, stupid. Blame it on Punxatawney Phil. Harsh winter weather in February had many consumers bundled up inside watching Netflix rather than braving the elements for some retail therapy. “Many Americans were dealing with excessive snowfall and were not in the mood to head out to the mall, auto dealerships, or restaurants,” wrote Chris G. Christopher, director of U.S. Consumer Markets at IHS Global Insights. “However, grocery stores and non-store (online) retailers weathered the storm rather nicely.”
2. Jobs numbers are finally looking better. Americans may not have been shopping in February, but they were working. After years of stress, the job market is showing positive momentum, driving down unemployment and providing more security to workers. On Friday, the Bureau of Labor Statistics reported that the unemployment rate fell to 5.5 percent as the economy added 295,000 jobs in February, even though many of those are in the low-wage service sector.
3. Gas prices are still low. Plunging gas prices were supposed to unleash a wave of additional consumer spending, and they still could. Gas prices averaged $2.45 this week, slightly higher than last month but still more than a $1 per gallon less than what consumers were paying this time last year, according to AAA. Those low prices have translated to a savings of more than $100 per month for consumers. “[Gas prices] should provide a plus to spending, once we dig ourselves out of the winter doldrums,” Mesirow Financial Chief Economist Diane Swonk wrote in a blog post today.
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