American consumers may be defying predictions that they would cut spending after Hurricane Katrina pushed up gasoline prices and undercut confidence, data from MasterCard International Inc. show.
Consumer spending was just as strong in the weeks after Katrina devastated the Gulf Coast as before the storm, according to figures from MasterCard, the No. 2 U.S. credit card company. Retail sales other than gasoline and autos rose 6.6 percent in the week ended Sept. 16 from the year-earlier period, unchanged from five weeks earlier, the Purchase, New York-based firm said.
"The sales growth rates so far are maintaining the momentum we had seen for most of the year,'' said Michael McNamara, director of research and analysis at SpendingPulse, a division of MasterCard Advisors. "The immediate reaction hasn't been as dramatic as the confidence surveys suggest."
The figures may suggest the U.S. economy won't slow as much as government and Wall Street forecasters first predicted, economists said. A report yesterday said manufacturing unexpectedly accelerated last month, adding to evidence the economy was already rebounding from Hurricanes Katrina and Rita.
Can this survey be trusted?
The SpendingPulse figures are based on the credit card purchases of the approximately 300 million MasterCard holders in the U.S. who charge about $750 billion a year on their cards, equivalent to about 20 percent of all retail sales. Consumer spending accounts for 70 percent of the U.S. economy.
MasterCard's data provided an accurate reading for retail spending in August. Retail sales excluding autos rose 1 percent that month, according to the Commerce Department's advance report, matching MasterCard's results.
Guess so. And we do have confirmation of a nice post-Katrina bounce from other sources. From Reuters:
Two separate reports showed U.S. chain store sales rose in the last week of September following softness in previous weeks related to Hurricane Katrina.
Redbook Research, an independent company, said sales in the fifth and final week of September rose by 3.5 percent on a year-over-year basis.
The International Council of Shopping Centers and UBS, in a joint report, said sales were 0.6 percent higher in the week to Oct. 1 after rising just 0.1 percent in the prior week and falling in the previous two weeks before that. Compared with the same week a year ago, sales were up 3.0 percent, after a 2.8 percent percent rise in the prior week.
For better or worse, it looks a bit premature to be pulling the sheet over the heads of the U.S. consumer.
UPDATE: The Wall Street Journal presents more mixed results:
As retailers began reporting their monthly sales figures Thursday, discounters including Wal-Mart Stores Inc. posted strong numbers, helped in part by increased demand of supplies like bottled water and batteries as shoppers dealt with the physical and emotional aftermath of Katrina and Hurricane Rita. But many mall-based apparel retailers, including Limited Brands Inc. and Talbots Inc., suffered.
"It is still early, but consumers were spending on essential items in September, and were foregoing nonessential purchases," said Ken Perkins, president of RetailMetrics LLC, a research firm in Swampscott, Mass.
These observations are not necessarily inconsistent with the Mastercard, Redbook, and International Council of Shopping Centers surveys. In the strongest environments, there will always be those businesses that are shrinking or underperforming. Although I have heard it claimed that a shift in spending from luxuries to necessities is a signal of tougher times, I don't know of any solid evidence indicating that such shifts help us predict the course of the macroeconomy.
UPDATE II: The Big Picture reports on a positive holiday sales forecast.