Economy is picking up

Jeannine Aversa

Tuesday, May 14, 2002 | 9:56 a.m.

WASHINGTON -- After a tightfisted March, U.S. consumers splurged in April and pushed retail sales up by 1.2 percent, the biggest increase in six months.

The latest sales snapshot released by the Commerce Department today suggests that consumers -- the lifeblood of the economy -- are helping to support the budding economic recovery by keeping their pocketbooks and wallets open.

The April advance came after retail sales nudged up by 0.1 percent in March and was stronger than the 0.6 percent gain many analysts were forecasting.

Consumers, whose spending accounts for two-thirds of all economic activity in the United States, snapped up cars, building materials, garden supplies and health care and beauty products last month. They also ate out more.

Higher prices at the pump for gasoline also contributed to the increase in overall retail sales in April.

However, excluding sales at gasoline stations and at car dealerships -- which tend to bounce around from month to month -- retail sales still rose a solid 1 percent.

The 1.2 percent increase in retail sales last month was the biggest gain since a record 6.2 percent in October.

"Consumer will once again play Atlas and support the economic recovery," said economist Richard Yamarone, with Argus Research Corp.

The strong showing last month came despite the fact that the nation's unemployment rate jumped to an eight-year high of 6 percent during the month. And, there was unseasonably cold weather and the fact that Easter fell in March this year.

Today's report showed that car sales went up 1.9 percent in April, following a 0.8 percent decline in March. Sales of building materials and garden supplies rose 2.7 percent, on top of a 1.7 percent gain.

At health and beauty stores, sales rose 1.9 percent, a turnaround from the 0.5 percent drop in March. Sales at clothing stores rose 0.7 percent, compared with a 0.3 percent dip. At department stores, sales increased 1.2 percent, after edging up 0.1 percent.

Sales at gasoline stations rose 2 percent, following a 4 percent increase. Increases in recent months reflect higher prices at the pump.

At bars and restaurants, sales rose 0.6 percent, after being flat.

Sales of electronics and appliances nudged up 0.1 percent, after being flat in March.

There were some weak spots. Sales of furniture and home furnishings dropped by 1.4 percent, following a 0.1 percent decline the previous month. Sporting goods stores saw sales dip 0.1 percent, after a 0.6 percent increase.

Concerns about how consumers, who kept on spending during the recession, will hold up during the recovery was a factor in the Federal Reserve's decision May 7 to keep short-term interest rates -- now at 40-year lows -- unchanged.

The Fed has held rates steady at all three of its meetings this year and many analysts say the central bank will not begin to push rates higher until fall, after unemployment peaks and begins to improve.

Economists expect the nation's jobless rate will top out at around 6.5 percent in June or July.

Economists worry that rising unemployment might make consumers scale back. Low interest rates, however, might persuade them to keep on buying and help along the economic recovery.

Last week, the nation's largest retailers, including Wal-Mart and Target, said April's sales were dampened by cool weather and the earlier Easter, making shoppers less inclined to hit the malls.

Today's report painted a brighter picture than that provided by the biggest retailers in party because the government report is broader and includes car sales and sales at gasoline stations -- both of which showed strength in April, Yamarone said. Still, he noted, the government data showed widespread gains for many retailers.