Retailers suffered from a bad cold in January, and nobody's willing to bet when they'll recover from it.
Stormy weather and economic jitters ahead of a possible war with Iraq kept consumers away from stores last month. U.S. retail sales for January are expected to have fallen 0.5% compared with the previous month, marking the first decline in four months. The government releases its report on January retail sales Thursday at 8:30 a.m.
The drop would follow a 1.2% increase in December sales, led by the auto sector. Car sales were again the reason for the swing -- but this time, to the downside, analysts say. The decline in the sector is expected to have nearly matched the 5% gain in December. Analysts pointed to the fact that automakers had "borrowed from future sales" by offering no-interest promotions as a reason for the downfall last month.
"Excluding autos, there was probably a small gain in retail sales. I believe the underlying trajectory could be positive, with consumers still buying cars on low interest rates, but less so than in the past," said Lara Rhame, economist at Brown Brothers Harriman and a former
Rhame seems to be one of the few who is willing to bet on a trend going forward. Most economists say doubts about softness in the job market remain, despite the latest decrease in the January unemployment rate to 5.7%.
Delos Smith, senior economist at the Conference Board, said he "is going with
Federal Reserve Chairman Alan Greenspan's opinion that it is just hard to tell what will happen now, given the heightened geopolitical tensions." Smith also believes the below-average temperatures throughout the U.S. in January strongly contributed to keeping shoppers at home.
Still, January wasn't all bad for retail sales. Price cuts in the period helped with an expected rise of 0.5% in retail sales excluding autos, though economists point at the rise in the price of fuel as one of the reasons for this increase. Also, because consumers tend to curb their spending after the holidays, the month is historically a low one for retailers.
Stores were lean going into the holiday, which could have accounted for part of January's decline, according to some analysts. "But what was truly disappointing was the level of spending during the holidays. The cold definitely kept people home," Rhame said. She added that she is keeping an eye on low apparel sales, which should continue to be under pressure, and any advances in furniture and home improvement sales.
In general, retailers that had more inventory left over were able to pull off a better performance.
, the world's largest retailer, said same-store sales grew 2.3% in January, facing a tough comparison with last year, when growth reached 8.6%. The company had expected growth of 2% to 4%.
Federated Department Stores
saw a 1.2% decline in January same-store sales, while
said comparable department-store sales fell 3.8%, as strong December sales resulted in lower levels of clearance merchandise from the holidays.
With war looming and business investment still weak, consumers have been holding on to their income. Analysts think this could be a sign that consumers might not be able to continue carrying the economy alone. "The consumer has carried most of the burden in 2002. But they can't continue being the sole provider of economic growth," said Tom Goetzinger, analyst at Morningstar.
Consumer spending, which represents two-thirds of the economy, has been a strong foundation for the nation's growth, as business spending has lagged.
Some economists say Thursday's number could say more about the past than future trends. Sales grew in the last three months of 2002, and although the holiday season was considered disastrous, many believe sales were unsustainable given the current economic conditions.