NEW YORK -- Retail spending in the United States rose in February by 0.3 percent, exceeding market expectations for a decline of 0.2 percent.
The increase was somewhat dampened by January’s gain being revised down to 0.1 percent from 0.5 percent. Excluding autos, sales increased by a strong 0.8 percent in February, beating expectations for a 0.2 percent gain.
February’s rise in retail sales was fairly broad based, led by a whopping 3.7 percent increase in sales at electronics and appliance stores, while purchases of food and beverage (1.3 percent), sporting goods (1.2 percent) and at general merchandise stores (1.0 percent) also experienced healthy increases. Despite falling, seasonally adjusted gasoline prices, sales at gasoline stations unexpectedly improved as well. Auto sales provided some offset, declining 2.0 percent in the month. Core sales, which exclude autos and gasoline, rose by 0.9 percent.
"The overall rise in retail sales in February comes as a surprise, because weakness was expected due to the adverse weather throughout the Northeast and Midwest in the early part of the month," said David Onyett-Jeffries, an economist with RBC Economics Research. "Last week’s Beige Book indicated that consumer spending 'improved slightly' since January, but noted that activity was limited on account of severe snowstorms keeping shoppers out of stores.
"Today’s report presents some upside risk to our forecast for first-quarter 2010 consumer expenditure of an annualized 2.4 percent and supports our view that consumer spending will be a significant contributor to overall economic growth in 2010 as improving labor-market conditions, stronger household balance sheets and low borrowing costs support moderately improving consumer demand," said Jeffries.
"The expected increased strength in consumer spending should gradually begin to put upward pressure on prices, but the significant amount of economic slack generated during the recession will keep these pressures at bay in the near term," he added. "We continue to expect the Fed funds target to remain in its current 0 percent to 0.25 percent range until the fourth quarter of 2010."
Canadian employment rises in February as unemployment rate falls
Canadian employment rose by 20,900 jobs in February, a slightly stronger gain than forecasts for a more moderate 15,500 rise going into today’s report.
The February rise builds on the 43,000 gain reported in January. The unemployment rate edged down to 8.2 percent in February as employment gains outstripped an 8,600 rise in the labour force in the month.
February’s gains reflected a 60,200 jump in full-time employment following January’s more moderate 1,400 gain. Part-time employment declined by 39,300 in the month. Gains were concentrated in the goods-producing industries that rose for the first time in three months with a 17,800 gain. Employment in services industries rose for a second consecutive month but by a more subdued 3,100. The rise in employment in goods producing industries was mainly concentrated in the manufacturing (16,900) and forestry, fishing and mining (10,600) sectors.
Gains in service-producing industries reflected fairly strong gains in the accommodation and food services (26,500) and the business, building and other support services (18,400) sectors with a notable offset coming from a 33,500 decline in wholesale and retail-trade services. The gains in accommodation and food services may have been partly related to the 2010 Winter Olympics and Paralympic Games in British Columbia during the month, said Nathan Janzen, an economist with RBC Economics Research.
For February, British Columbia, Nova Scotia and Saskatchewan led the employment gains.
The annual gain in the average hourly wage rate for permanent workers picked up to 2.5 percent in February, up from the 2.2 percent recorded in January but still well below the 3.9 percent annual rise a year earlier.
"The increases in employment in both January and February bode well for the pace of expansion to remain firm in the first quarter of 2010 following the surprisingly strong 5.0 percent surge in growth in the fourth quarter of 2009," said Janzen. "Although the monthly employment numbers are volatile, the combined 63,900 jobs created so far in January and February suggests that the quarterly job gain in the first quarter of 2010 could exceed the total 20,700 gain recorded in the fourth quarter of 2009.
"This pick-up in labor markets remains consistent with our expectation that GDP growth early in 2010 likely remained solid at a 3.8 percent annualized rate in the first quarter of 2010," he added. "We expect the unemployment rate to remain elevated near term; however, we expect that sustained economic growth will eventually put downward pressure on the measure over the second half of 2010.
"As the recovery continues to pick up, the bank will begin to look to withdraw monetary stimulus. However we expect that moderate inflation growth will allow the Bank of Canada to keep the pace of tightening moderate," said Janzen. "The overnight rate is expected to be held steady at 0.25 percent until the end of the second quarter. Rates will start to rise over the second half of this year yet by only 100 basis points, finishing 2010 at 1.25 percent."
SOURCE: RBC Economics Research press release