January looks like it was a pretty good month. With the economy apparently stumbling across the finish line in 2005, my generally optimistic outlook was being sorely tested at year end. But I've yet to see any evidence in this still very young year that would lead me to believe the fourth quarter of last year was anything more than just one of those things.
Add the January retail sales report to the list of evidence to set the bears a-frowning. From the Wall Street Journal (page A1 of the print edition):
Consumers went on a post holiday shopping spree in January, a strong sign of economic vigor that increases the likelihood the Federal Reserve will keep raising short-term interest rates.
The Commerce Department said yesterday that retail sales surged a seasonally adjusted 2.3% in January from December, largely because of gift-card redemptions and abnormally mild winter weather. The January jump followed a tepid 0.4% rise in December. January sales were up 8.8% from a year earlier.
Coming after an earlier report that employers added nearly 200,000 jobs in January and pushed the unemployment rate down to 4.7%, the retail-sales report was cheered as evidence that the economy has roared back from a fourth-quarter lull. "It wipes out the weakness we saw in preceding months," said Peter Hooper, chief U.S. economist at Deutsche Bank. "We were expecting the fourth-quarter slowdown was transitory. This confirms that."
The best news was that the gains were not driven by the ever-volatile auto industry or higher prices at the pump:
Even excluding the 2.9% increase in sales of motor vehicles and parts and a 5.5% rise in gasoline-station sales driven by higher pump prices, the remainder of January retail sales -- everything from department stores to bars -- were up 1.8% from December, when such sales rose just 0.3%.
"It was extraordinary," said Rosalind Wells, chief economist at the National Retail Federation, a trade group.
Here's the picture proof (from the Census Bureau report):
Too much good cheer for you? Here -- this will make you feel better:
Ms. Wells of the retail federation and other economists cautioned that two primary drivers of January's sales growth -- balmy weather and gift-card purchases -- will likely evaporate this month, particularly after a blizzard last weekend snowed in consumers throughout the Northeast...
The January bounce was "a one-month shot," Ms. Wells said. "We're likely to see weak February sales because of the blizzards in the Northeast, and then generally I think the economy is going to slow as the year goes on."
That may very well be true, but it increasingly looks like the slowdown might be relative to a very robust beginning.