Retail Up, But Consumer Sentiment Down

By:: Kara Johnson | March 12, 2010

Consumer sentiment fell in early March, despite coming on the heels of an unexpected jump in retail spending in February.

Preliminary figures for the Reuters/University of Michigan consumer sentiment index, released today, show a decline to 72.5 in March, down from 73.6 in February. Economists had predicted a slight increase.

It’s the second consecutive monthly decline for the index, which has risen in fits and starts since bottoming out at 55.3 in November 2008. The current figures for March are preliminary data; final figures based on a larger sample size will be released toward the end of the month.

The consumer sentiment report came out just as the Commerce Department announced that February retail sales increased 0.3 percent from the month before and were up 3.9 percent from one year before. It was the fourth monthly increase in the past five months and came despite severe winter weather in parts of the country.

The overall increase was held down by a decline in automobile sales, which analysts linked to the widely reported problems experienced by Toyota in regard to acceleration surges. Auto sales, including vehicles and parts, were down 2.0 percent from January, while total retail and food services excluding automotive were up 0.8 percent.

Commerce Secretary Gary Locke called the increase a “welcome sign of economic recovery,” saying it showed the growing willingness of consumers to spend despite February’s harsh weather.

Consumer spending is a closely watched economic indicator, as it is generally assumed to make up 70 percent of all economic activity.

Other figures released by the Commerce Department today showed that business-to-business sales were up 0.6 percent in February, the eighth consecutive monthly increase, while inventories remain unchanged. Economists are hoping that as retailers deplete their inventories, new orders will spur increased production and help feed an economic recovery.

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