Video Reports

Embed this video

Copy Code

Link to this video

Get LinkEmbedLicenseRecommend (-)Print
Bookmark and Share

By Jason Stipp and Robert Johnson, CFA | 02-14-2013 11:00 AM

Headwinds and Tailwinds for Consumer Spending

Several opposing factors were at play in January's retail sales report, but a broader view suggests consumers are still hanging in there, says Morningstar's Bob Johnson.

Jason Stipp: I'm Jason Stipp for Morningstar. We got the retail sales report from the government this week. Retail sales for January were up an anemic 0.1%. So what's the true health of the consumer? Joining us to offer his insights is Morningstar's Bob Johnson, our director of economic analysis.

Thanks for joining me, Bob.

Bob Johnson: Great to be here.

Stipp: 0.1% month-to-month number doesn't seem very strong, but it was a little bit better than some people expected. What was your take on that number?

Johnson: I think the number was just a little bit below what I have been thinking at 0.1% month over month growth, but on a year-over-year basis, we're still in very good shape on that number. In fact the growth rate there is accelerating. In the last few months, it's been 3.7%, 3.8% and now 4.2%, looking at year-over-year average data. So, I think you've got to be careful not to take one number out of context.

We had two months in a row, November and December when retail sales were up over 1%; it's very hard to string together three positive monthly growth rates in retail sales. We've tended to have two up and one down, two up and one down. It's very hard to even string together three of them. So, this did not come as a surprise.

Stipp: When you look at the underlying sectors, some things that had been up before were down, and some things that had been down before were up. But it's not like everything was down.

Johnson: .No. There were categories that did well. Non-store retailers, the Amazons of the world, did well. Groceries did well. Apparel did not do so well. And furniture, which had been on a tear because of better housing starts, took a little pause. [Furniture] had been at 1% [growth] a period, but it was now minus 0.2% [in January]. And electronics were up, and that's been on a yo-yo recently, too. So, it's not like the whole world collapsed or anything happened in retail. I think we had two very good months, and we backed off a little bit.

Stipp: And there were expectations, as you said, that January wasn't going to be a great month. There were some headwinds. There were also some tailwinds that maybe people weren't quite expecting, but let's start with the headwinds first.

The one I think that worried people the most was this payroll tax holiday that expired. So people are paying more payroll taxes starting in January because of that expiration. And there were concerns that this was really going to affect the retail sales report. Do you think that it affected it?

Read Full Transcript
{0}-{1} of {2} Comments
{0}-{1} of {2} Comment
  • This post has been reported.
  • Comment removed for violation of Terms of Use ({0})
    Please create a username to comment on this article