WASHINGTON – Shoppers, after being tightfisted in January, opened their wallets and pocketbooks in February, pushing sales at the nation's retailers up by 0.3 percent.
The advance — the largest in four months — came after Americans trimmed their spending by 0.3 percent in January, reflecting in large part a drop in spending on cars and trucks as free-financing offers waned, the Commerce Department reported Wednesday.
Although the 0.3 percent rise in February was smaller than many economists were forecasting, the fact that spending went up should be an encouraging sign that consumers, the lifeblood of the economy, may continue to spend — albeit modestly — and help along the current recovery.
Consumer spending accounts for two-thirds of all economic activity in the United States and its strength during the slump has been a key reason why the economy, which fell into recession in March 2001, didn't sink deeper.
Federal Reserve Chairman Alan Greenspan told Congress last week that a recovery is well under way, but warned that Americans should not expect a sizzling rebound.
Unlike past recessions, consumers continued to spend throughout this one, meaning they probably will not have a lot of pent-up demand to spend lavishly as the economy recovers.
Low interest rates, free-financing offers, extra cash coming from a refinancing boom in home mortgages and heavily discounted merchandise all were factors inducing Americans to spend during the slump. In February, mild weather also helped out, motivating shoppers to get out and hit the malls.
To revive the economy, the Federal Reserve slashed interest rates 11 times last year, driving down the prime interest rate — a benchmark for many consumer and business loans — to its lowest level since late 1965.
Fed policy-makers opted to leave interest rates alone in January and at their meeting next week they are expected to do the same, analysts said.
Wednesday's report showed that sales of furniture and home furnishings in February rose 1.5 percent, after advancing by 0.3 percent in January. Sales of electronics and appliances grew 1.1 percent, following a 3.2 percent decline.
Americans also ate out more last month. Sales at restaurants and bars rose 1.1 percent, after falling 2.5 percent in January.
Sales of new cars and trucks went up 0.4 percent in February, following a 4.6 percent decline.
Excluding auto sales, total retail sales grew by 0.2 percent in February, after a 1.2 percent gain.
There were some weak spots in the report. Sales at sporting goods, hobby shops and book and music stores fell 1.6 percent, after rising 2.9 percent. Building and garden supplies saw sales dip by 0.4 percent, following a 2.8 percent advance. After rising solidly in January both sales of health and beauty products and clothing edged down 0.1 percent.
At gasoline stations, sales were flat, following a 4.2 percent rise, reflecting higher prices at the pump.
Last week, reports from the nation's largest merchants continued to show that the overall retail business is fragmented, with discounters posting gains but department stores and apparel chains still struggling.