Confident shoppers: 'I want to buy’

  • Article by: THOMAS LEE , Star Tribune
  • Updated: April 6, 2012 - 6:43 AM

Retail sales follow other indicators that are showing the economy is on the mend.

The U.S. economy was supposed to be slow and unsteady in early 2012. Retailers are proving otherwise.

For the fourth consecutive month, major retail chains reported better-than-expected sales numbers, the latest sign that Americans are gaining confidence in the economic recovery and are ready to spend more.

Overall, 20 major retailers said on Thursday that sales at stores open for at least a year rose 3.9 percent in March; analysts expected 3.3 percent.

The retail surge follows a string of positive news that suggests the economy is building momentum. Manufacturing orders are rising, and personal income is up. Even the beleaguered housing market has shown signs of life.

"People are cautiously optimistic about where the economy is headed," said Scott Erickson, a partner in Deloitte Consulting's retail practice. "They feel a little more comfortable."

Although millions of Americans are still out of work, companies have created more jobs in recent months, and shoppers are marching back to stores. Retail activity is a critical bellwether, as consumer spending accounts for more than 70 percent of all economic activity.

Minnesota retail giant Target is enjoying an especially strong start to 2012. The discounter said sales at stores open for at least 12 months jumped 7.3 percent in March, following increases of 7 percent in February and 4.1 percent in January. (Stores open at least one year are a better indicator of a retailer's health because it excludes stores that have recently opened or closed.)

Retailers likely have benefitted from unusually warm weather, which boosts demand for spring clothing and makes it easier for people to venture outside to shop.

Janie Peterson, a 44-year-old Golden Valley resident, says she is ready to hit the stores again.

"I have been confident," said Peterson, who owns a video production company. "My savings account is big enough now so I can spend a little bit."

According to recent survey conducted by Deloitte, 67 percent of consumers say they will spend more or about the same this year, compared with 58 percent in 2011. Fewer people think the country is still mired in recession, while more consumers believe the economy is continuing to recover.

Ashley Imdieke, a senior at St. Cloud State University, has yet to find a job after she graduates this spring. Still, the 22-year-old says she is opening her wallet to help furnish the Minneapolis apartment she's sharing with her fiancé.

"I feel the economy is getting a little bit better," Imdieke said. "I'm able to afford a little bit more."

Retailers of all stripes are doing well. Macy's, a mid-to-upper-scale department store chain, said March same-store sales rose 7.3 percent while discount chain T.J. Maxx said sales jumped 10 percent. Even Gap, which has struggled for years, reported an 8 percent gain compared with a 10 percent decline in March 2011.

Target said business was strong across all of its categories. In particular, shoppers spent more on food, household essentials and clothing, where sales grew in the double digits.

"March sales were well above our expectations, reflecting a healthy underlying [economic] trend combined with the benefit of an earlier Easter and favorable weather this year," Target CEO Gregg Steinhafel said in a statement.

But analysts caution the economy faces several unknowns in the months ahead. Gasoline prices remain high, millions of Americans remain unemployed or underemployed and Europe's economic woes could have ripple effects here.

Jeremy Brunelli, a retail analyst with Consumer Edge Research in Stamford, Conn., said the biggest factor affecting retail sales is the job market, which is still not creating enough jobs to replace the millions lost in the Great Recession.

"When people are working, they have more ability to spend money," Brunelli said.

Fortunately for retailers, the labor trend is promising.

American payrolls grew by 227,000 in February, capping the best six-month streak of job growth since 2006. A report Friday is expected to show that 205,000 new jobs were created in March, according to a survey of economists by Bloomberg News.

Brunelli said retail sales will keep growing "as long as we see continued improvement in the labor market."

Peterson of Golden Valley is certainly bullish. Her company, Peterson Production, has shown solid growth over the past two years.

"I built my savings up to a point where I ask myself, 'Now what?'" she said. "I want to spend."

Bloomberg News contributed to this report.

Thomas Lee • 612-673-4113

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