Jeannine Aversa
Associated Press
Mar. 14, 2007 12:00 AM
The Commerce Department's report, released Tuesday, raised fresh concerns that consumers could tighten the belt further, causing economic growth to slow even more than anticipated. Retail sales edged up only 0.
1 percent in February. Sales were flat in January as shoppers took a breather after buying briskly during the holidays.
-- BOXAD TABLE --> "Households hit the deep freeze when it came to spending," said Joel Naroff, president of Naroff Economic Advisors. Shoppers in February cut spending on a wide range of goods, including home furnishings, building and garden supplies, clothing, electronics and appliances, and sporting goods, books and music. They also ate out less.
A bright spot was auto sales, which went up by 0.9 percent in February. That followed a decrease of the same size in the previous month.
The latest retail sales figures were weaker than economists were forecasting. They expected sales would go up by 0.3 percent.
Excluding auto sales, which can swing widely from month to month, sales at all other merchants in February actually dipped by 0.1 percent, the worst performance since October. Economists were predicting a 0.
3 percent rise in this category in February. Consumer spending plays a major role in shaping overall economic activity, and therefore is closely watched by economists. The economy has been going through a spell of sluggish growth, reflecting the strain from the housing slump and the ailing automotive industry.
So far, consumers have been spending sufficiently to keep the economy expanding. But consumers could clamp down if the housing slump was to get even worse and that could spell trouble for the economy. Gas prices, meanwhile, are rising again.
An unanticipated jolt in energy prices also could be jarring to consumers, as well as to the overall economy. The sales figures for the two winter months suggest consumer spending in the first quarter of this year got off to a bumpy start, analysts said. The Federal Reserve, which had boosted interest rates steadily for two years to thwart inflation, has left rates alone since August.
Many economists predict the Fed will hold rates steady again when it meets next week. The Fed's goal is to slow the economy enough to fend off inflation but not so much as to cripple economic activity. If the weakness in retail sales persists, it would boost the odds the Fed might consider cutting rates later this year, economists said.
In other economic news, the Commerce Department said business inventories of unsold goods rose 0.2 percent in January.
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