Does the Rosy Retail Sales Report Mean the Economy is Back on Track?

According to the National Retail Federation, retail sales beat estimates in February as consumers quickly adapted and adjusted their spending in response to an increase in payroll taxes and higher gasoline prices. February retail sales (excluding automobiles, gas stations and restaurants), NRF reported, increased 0.7 percent seasonally adjusted from January and increased 0.5 percent unadjusted year-over-year.

But while some economists are pointing to this bullish news as the latest sign of an ecommonic recovery across the board, NRF President and CEO Matthew Shay says no so fast. “Retail continues to show its importance to the economy,” he said in an NRF press release. “That said, our consumer research consistently shows a cautious shopper that is making tough spending decisions based upon economic uncertainties, lower paychecks and higher prices for things such as gas. This is particularly true among those making $50,000 or less a year."

While retail sales numbers indicate good momentum for the economy, "consumers with less earning power may continue to face ongoing pressure and retail sales will encounter further challenges as sequestration takes full effect in March," Shay added.

Indeed, for this past month at least, consumers were not derailed by higher taxes, higher gasoline prices and political uncertainty. Instead, they've been energized by job growth, a rise in home prices and gains in the stock market. But NRF's Shay cautioned that last month’s numbers don’t mean that consumers are in the clear from the repeal of the payroll tax holiday, a continued sluggish economic outlook and destabilizing policy environment in Washington.

In a recent survey NRF conducted with BIGinsight, 75 percent of those polled said they are adjusting their spending to cope with the payroll tax change. Most importantly, Americans will simply spend less; over 56 percent of Americans indicated that they will spend less overall, and that is a direct threat to retail sales and our economy as a whole.

While the outlook is far from certain, for now at least, good news is good news.
What is your take on the retail numbers this month? Would love to hear your thoughts! Please leave a comment below!