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Winnipeg Free Press - PRINT EDITION

Strong back-to-school sales give U.S. retailers hope

By: Anne D'Innocenzio

Posted: 08/31/2012 1:00 AM | Comments: 0

NEW YORK -- This summer, Americans were walking contradictions: They opened their wallets despite escalating fears about the slow economic recovery and surging gas prices.

A group of 18 retailers ranging from discounter Target to department-store chain Macy's reported August sales on Thursday that rose six per cent -- the industry's best performance since March -- according to trade group the International Council of Shopping Centers.

At the same time, the government released numbers showing Americans spent in July at the fastest clip in five months.

The news appears to show that what Americans say and do are two different things: The reports come two days after the New York-based Conference Board said consumer confidence in August fell to its lowest level since November 2011 as Americans grew more concerned about the job market, business conditions and the overall economy.

"This is bit of a head-scratcher," said Mark Vitner, a Wells Fargo Securities senior economist. "This runs counter to most of the other data related to the consumer."

But Roxane Battle Morrison, 50, said there's a logical explanation for the paradox. The Plymouth, Minn., resident said she is more worried about the economy, but she spent in August for one reason: she needed to help her 18-year-old son Jared get ready for college. So, Morrison, who produces videos for a nondenominational church, has stashed money away every month over the past year to save nearly $1,300 to buy him books, sheets, a futon bed and other dorm room accessories.

"I was counting every nickel, looking at every price tag," she said.

That consumers like Morrison are spending is an encouraging sign, but that they are doing so hesitantly is something retailers and economists will be watching closely. Consumer spending accounts for 70 per cent of economic activity. And while only a small group of merchants representing roughly 13 per cent of the $2.4-trillion U.S. retail industry report monthly revenue figures, the August numbers still offer a glimpse at how Americans are spending.

The revenue gains in August, which only factor in stores that were open at least a year, are better than the four to five per cent increase Wall Street predicted at the beginning of the month. And it was the industry's best performance since March, when stores collectively posted a gain of 6.8 per cent.

"It's certainly strong on the surface. But is it a sign of an improving economy and retailing environment? Or is it just more of the same: shoppers were driven by need," said Michael P. Niemira, chief economist at the International Council of Shopping Centers.

The strong sales reports give retailers some reason to be optimistic as they look toward the busy winter holiday shopping season, the biggest shopping period of the year, in November and December. That's because Americans were spending in August despite signs that they're becoming impatient with the slowly improving economy.

-- The Associated Press

Republished from the Winnipeg Free Press print edition August 31, 2012 B13

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