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NEW YORK (AP) — This summer, Americans were walking contradictions: They spent despite their escalating fears about the slow economic recovery and surging gas prices.A group of 18 retailers ranging from discounter Target to club-operator Costco reported August sales on Thursday that rose 6 per cent — the industry’s best performance since March — according to trade group International Council of Shopping centres. At the same time, the government released numbers showing that Americans spent in July at the fastest clip in five months.
The reports appear to show that what Americans say and do are two different things: The news comes two days after a private research firm said consumer confidence in August fell to its lowest level since November 2011 as Americans grew more concerned about the job market, business conditions and the overall economy.
“It shows some resilience among shoppers. Let’s face it. There are a whole series of economic headwinds that they are fighting against,” said Ken Perkins, president of Retail Metrics, a research firm. “The results show that the consumer isn’t dead.”
A small group of merchants representing roughly 13 per cent of the $2.4 trillion U.S. retail industry report monthly revenue at stores open at least a year, a key measure since it excludes results from locations that open and close during the year. Some of the biggest retailers like Wal-Mart and Home Depot do not report monthly sales, but the figures still are closely watched because they offer a snapshot of consumer spending, which accounts for more than 70 per cent of economic activity.
August’s results are important because they offer insight into the back-to-school season — the second most important selling period behind the winter holidays — which runs from mid-July through mid-September. Retailers and economists often use the results from back-to-school as a litmus test of how shoppers will behave during the biggest shopping period of the year in November and December.
The gains in August is better than the growth 4- to 5-per cent gain Wall Street predicted at the beginning of the month. And it was the best performance since March, when stores collectively posted a gain of 6.8 per cent. Except for a shopping lull in June, stores have seen a healthy pace of anywhere from 4 per cent to nearly 7 per cent growth since the beginning of the year.
A number of retailers posted strong gains. Costco Wholesale Corp.’s revenue from stores open at least a year climbed 6 per cent, beating the 4.5 per cent rise analysts surveyed by Thomson Reuters had anticipated. And Target Corp. reported a 4.2 per cent increase in revenue at stores opened at least a year. That was better than the 3.1 per cent increase that analysts had expected.
“Sales were stronger in the second half of the month,” said Gregg Steinhafel, Target’s chairman, president and chief executive officer in a statement.
The strong sales reports are an encouraging sign for retailers at a time when there are signs that consumers are becoming impatient with the slowly improving economy. The New York-based Conference Board’s Consumer Confidence Index fell to 60.6, down from a revised 65.4 in July. The index now stands at the lowest point since November 2011 when the reading was at 55.2. It’s also still far below the 90-reading that indicates a healthy economy.
Several factors may have dampened consumers’ moods in August. Gas prices, which had fell sharply from a peak of $3.94 in April, have begun rising again in the last few weeks. And the jobs and housing markets are showing only modest signs of improvement.
Home prices rose 0.5 per cent in June from the same month last year, the first year-over-year increase since the summer of 2010, according to The Standard & Poor’s/Case-Shiller home price index that was released Tuesday. And on the job market front, employers added 163,000 jobs in July, the most since February. But that’s not enough to keep up with a rising population, and the unemployment rate increased to 8.3 per cent from 8.2 per cent in June.
And there are no signs the job market will significantly improve anytime soon. The applications of people applying for unemployment benefits are a measure of the pace of layoffs. When they fall consistently below 375,000, it generally suggests that hiring is strong enough to lower the unemployment rate. But the labour Department said Thursday that the number of Americans seeking unemployment benefits was unchanged last week at a seasonally adjusted 374,000, which further suggests slow improvement. The four-week moving average, a less volatile measure, increased to 370,250.
Most economists say stronger growth is needed to produce enough jobs to lower unemployment — and make Americans feel better. The economy grew at an annual rate of 1.5 per cent from April through June, down from 2 per cent in the first quarter and 4.1 per cent in the fourth quarter of 2011.
Despite their concerns about the snail pace recovery, Americans are spending, which could boost an economy mired in subpar growth. The Commerce Department said Thursday that consumer spending rose 0.4 per cent in July from June, following no change in June and a slight decline in May. Income grew 0.3 per cent, matching the gains from May and June.
AP Economics Writer Daniel Wagner in Washington contributed to this report.