Businesses, consumers give economy a boost
American businesses and consumers are giving the economy a boost by spending more, but the troubled housing market remains an obstacle, new data show.
Consumers bought more from retailers for a seventh- straight month in January. The gains came despite snowstorms that limited spending from workers with more money in their paychecks from a Social Security tax cut.
Businesses increased their stockpiles in every month last year, a sign that companies expect sales to remain healthy.
Still, the view of the housing market among home builders hasn’t changed in four months, suggesting weak home sales will drag on the economy throughout the year.
Chris Christopher, an economist at IHS Global Insight, said consumer spending likely will continue to increase over the next few months. But he predicts it will happen more slowly than at the end of last year, even with workers taking home more pay from the tax cut.
“Winter storms, a poor housing market, rising gasoline and food prices and lackluster employment growth ... put a damper on things,” Christopher said.
Retail sales rose 0.3 percent last month to $318.6 billion, the Commerce Department said Tuesday. Sales have risen more than 14 percent from the recession low in December 2008.
People spent more at department stores and on electronics while also paying higher prices for gas. Online sales increased at a healthy pace.
Still, the harsh winter weather slowed traffic at restaurants and building-supply stores. Americans also spent less on clothing and furniture.
The snow slowed what was looking to be another strong month for car sales, which ended up rising only 0.5 percent after a 1.5 percent gain in December.
Part of the overall retail-sales gain last month reflected higher gasoline prices. Sales at gasoline service stations climbed 1.4 percent. Excluding the rise at gas stations, retail sales would have risen 0.2 percent last month.
January is a time when stores clear out winter goods at deep discounts to make room for spring merchandise. It is the least- important month of the year for retailers. Still, last month showed an underlying healthy consumer demand as shoppers took advantage of clearance sales to replenish their wardrobes.