Retailers Optimistic as January Sales Show Continued Improvement

February Figures Could Be Affected by East Coast Blizzard

ARLINGTON, Va., Feb. 12 /PRNewswire-USNewswire/ -- Monthly retail sales figures released today by the Department of Commerce showed broad gains in January over the previous month. Retail sales are up considerably over the past year, adding to the mounting evidence that the economy is growing and recovery is underway, noted the Retail Industry Leaders Association (RILA).

Excluding auto sales, retail sales rose 0.6 percent from December, with gains in nearly all retail categories. The largest increases were among general merchandise retailers (including discount stores), electronics, sporting goods, and grocery stores. Sales declined at furniture retailers and building supplies, in line with data showing that housing construction slowed in late 2009 after having rebounded through much of the year. Sales at motor vehicle and parts dealers were essentially flat in January. Retail sales excluding gasoline, motor vehicles, furniture, and building supplies (components that tend to be volatile) rose by a solid 0.8 percent in January and are up 2.7 percent from a year ago. Overall retail sales including these categories are up by 4.7 percent from January 2009.

Today's retail sales figures follow news last week from the U.S. Department of Labor that retailers added 42,000 jobs in January.  

"Retail sales growth in January provides retailers and consumers with additional evidence that the worst is behind us and economic recovery is underway," said Casey Chroust, RILA's executive vice president for retail operations. "Retailers recognize that a meaningful economic recovery will take time and can be interrupted by uncontrollable events such as this week's east coast blizzard, which kept consumers at home for nearly a week."

"With substantial top line growth challenges resulting from the economy, retail performance will continue to rely heavily on controlling costs as retailers maintain tight inventories, and place smaller and more frequent orders. These inventory measures will continue to positively affect cost management and gross margin performance," said Chroust.

Recent data indicate that the economy has turned modestly upward, but is not yet creating jobs.  GDP grew at a 5.7 percent pace in the last three months of 2009 and is on track for continued expansion in 2010. Measures of consumer confidence moved higher in January, in line with moderate gains in household incomes and spending. Employers have not yet begun to hire, but a decline in initial claims for unemployment insurance, increases in workers' weekly hours, and expanded use of temporary employees all point to a gradual firming of the labor market.

"Retailers understand the road to a full recovery is a long one and until U.S. job losses stop and job creation begins consumer activity will remain subdued," added Chroust.

Business spending stabilized at the end of 2009, and substantial increases in orders for capital goods over the past several months suggest that business investment will expand further. This is matched by surveys of purchasing managers that indicate increased production and employment at both manufacturing and services firms. Continued economic growth will eventually lead to hiring, but the labor market lags behind for now.

"Broad-based gains in retail sales in January mirror recent improvements in family incomes," said Phillip Swagel, visiting professor at Georgetown University's McDonough School of Business and RILA outside economist. "We are still in the early part of the economic recovery.  Sustained economic growth is needed to drive a job market rebound. Policymakers could help by reducing the uncertainty facing job creators in terms of taxes, health costs, energy, and regulation."

RILA is the trade association of the world's largest and most innovative retail companies. RILA members include more than 200 retailers, product manufacturers, and service suppliers, which together account for more than $1.5 trillion in annual sales, millions of American jobs and more than 100,000 stores, manufacturing facilities and distribution centers domestically and abroad.

Phillip L. Swagel is a visiting professor at the McDonough School of Business at Georgetown University, where he teaches classes on financial markets and directs the Center for Financial Institutions, Policy, and Governance. He is also a non-resident scholar at the American Enterprise Institute.

Dr. Swagel was Assistant Secretary for Economic Policy at the Treasury Department from December 2006 to January 2009. He has previously taught at the University of Chicago Booth School of Business and Northwestern University, and held positions at the President's Council of Economic Advisers, the International Monetary Fund, and the Federal Reserve.

SOURCE Retail Industry Leaders Association