Transcripts

Consumer Spending Gives the Economy a Much Needed Jolt

SUSIE GHARIB: Consumer spending perked up a bit in January and the nation's retailers hope that trend continues thanks to some help from Uncle Sam. The government reported today that retail sales unexpectedly rose 0.3 of 1 percent last month, after falling 0.4 of a percent in December. The report comes on the same day President Bush signed the $152 billion stimulus package. Suzanne Pratt reports on what today's data means for an economy that may be on the brink of recession.

SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: Don't count out the U.S. consumer just yet. That seems to be the message of the January retail sales report. The data strengthens the argument of those who think the economy will be able to avoid recession. Even though Bear Stearns economist Conrad de Quadros says the report isn't as strong as it first appears, he still does not believe the economy is contracting.

CONRAD DEQUADROS, SR. ECONOMIST, BEAR STEARNS: Recession risks are high. But, at this point we think that the most likely scenario is weak growth rather than recession.

PRATT: Nevertheless, de Quadros says the details of the report suggest the consumer is stressed. Strong demand for clothing, new cars and gasoline were behind the surprising jump in sales. But, the increase in gasoline purchases actually reflected higher prices at the pump. In most other areas, consumers pulled back on their spending.

DEQUADROS: If you look at food away from home for example, restaurants and bars. If you look at the sports and hobbies and all of the non-essential spending, those areas showed declines as did the areas that were related to the housing markets.

PRATT: Other economists question the accuracy of the retail sales report itself. It showed a .6 of a percent jump in sales at auto dealerships and parts stores. That contrasts with industry figures that showed a nearly 7 percent drop in sales of cars and light trucks last month. UBS economist Jim O'Sullivan says the government uses the industry auto sales data when estimating growth for the overall economy.

JAMES O'SULLIVAN, U.S. ECONOMIST, UBS: In the end when the government puts together GDP data for autos they use the auto makers' numbers, not the retail sales report. Yes, it was stronger than expected, but much of the strength and much of the surprise was in a part that is not very reliable.

PRATT: Here's no question today's data keeps the debate going about recession. Most experts agree the key question remains unanswered as to whether consumer spending is slowing down or coming to a halt. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.