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		Home Page Mortgage News You Can Use Retail Sales Fall 0.3% But Up 0.9% Ex Autos; Consumers Keep Going Friday February 13, 9:57 am ET By Jed Graham Consumers cut back on auto spending in January, but splurged in most other retail categories, Commerce Department data showed Thursday. Retail sales unexpectedly fell 0.3% from December, but nonauto sales rose a better-than-expected 0.9%, the biggest gain in five months. Overall sales rose 5% from a year ago, with nonauto sales up a strong 6.6%. "Consumer demand hasn't been and won't be a missing ingredient in this" recovery, said Stuart Hoffman, chief economist at PNC Financial Services. Separately, jobless claims last week rose 7,000 to 363,000, the highest in two months. But the Labor Department said the backup in claims the past two weeks is more a result of bad weather than a deteriorating job market. The number of people continuing to collect jobless benefits fell 23,000 in the week ended Jan. 31 to 3.083 million, the fewest since the week of July 28, 2001. "Hiring is still very, very slow, but firing is slowing down too," Hoffman said. "The numbers on payroll jobs are going up, but they're going up slowly. I don't expect it to change quickly." Auto spending has been buoyed by incentives and is typically financed, rather than paid for out of current income. So the fall in auto sales was less discouraging than the gain in ex auto sales was encouraging, said David Wyss, chief economist at Standard & Poor's. Even excluding a 1.7% rise in sales at the gas pump, nonauto sales rose 0.8% in January. Sales at clothing stores surged 2.9% from December, the biggest gain since July 2002, and rose 6.7% from a year ago. Sales at general merchandise stores rose 1% after a 0.3% gain the prior month, and were up 6.9% on the year. Department stores, a subset of general merchandise stores, saw sales rise 0.5% after a flat December. Restaurant sales rose 1.1% after December's 0.5% gain, bringing the year-over-year gain to 10.4%. Sales at sporting goods, book and music retailers jumped 1.6% after rising 0.6% the prior month. Other than a 3.9% drop in auto-related sales, there were two major weak spots. Furniture sales fell 0.9%, but were still up 5.2% on the year. Sales of building material fell 0.9%, which some economists attributed to bad weather, but remained 8.9% above a year ago. "Consumers are doing as much as they can," Wyss said, noting that saving fell to a lowly 1.3% of disposable income in December. But unusually large tax refunds this spring, thanks to the retroactive nature of last year's tax cuts, means consumer spending could get "one more burst," Wyss said. While most economists predict decent consumer spending this year, they expect business to lead the recovery via capital spending, hiring and inventory rebuilding. In December, businesses boosted inventories by a better-than-expected 0.3%, the fourth straight gain, Commerce also reported Thursday. Inventories rose a revised 0.4% in Nov. The stronger inventory additions could mean an upward revision to the 4% fourth-quarter GDP growth, Hoffman noted. But sales are rising faster. Business sales rose 0.9% in December after November's 0.7% gain. So the ratio of inventories to sales fell to a record low 1.34 in December, Commerce said. Inventories may not outpace sales soon, Wyss said. "We've had this move toward just-in-time sales," he said, in which firms use technology to manage orders to keep inventories to a minimum. Wyss sees a parallel between inventory management and the way firms are resisting the urge to hire by adding contract workers or "just-in-time employees." The growing use of so-called independent contractors, which don't show up on payrolls, is one explanation for the unprecedented divergence between the Labor Department's two main jobs gauges. Monthly payroll figures, derived from a survey of 160,000 employers, show a net loss of 339,000 jobs from January 2001 to January 2003. But the monthly survey of about 60,000 households shows the economy has added 2.8 million jobs in that span. Many economists have argued the household data are more accurate early in a recovery, since the Labor Department has difficulty tracking payrolls at new firms. Fed Chairman Alan Greenspan squelched the debate. He thinks the payroll data are more accurate. "Household employment has been overestimated largely because of what we perceive to be an overestimate of population," Greenspan said Thursday. Hoffman said that "the truth lies somewhere in between" the two surveys. As far as anticipating Fed action, "Greenspan made it very clear - payroll jobs are what matters." Back to Original Article: News You Can Use   Continue with: Trade Gap Widens, Consumer Confidence Off Consumer Sentiment in U.S. Declines More Than Expected in Michigan Survey U.S. Trade Deficit Hit Record High in '03 Treasuries, Friday, Feb. 13 Treasury's Snow blames war on terror for US deficit
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