May 13 - U.S. consumers spend more on cars, clothes, and home supplies in April, defying the payroll tax hike and cold weather. Fred Katayama reports.
Nothing would get in the way of the determined shopper in April - not payroll tax hikes, not government spending cuts, not even unusually cold weather. Retail sales unexpectedly rose one-tenth of a percent. Strip out volatile categories like gas and cars, and you get a half-percent increase. Joseph Feldman, assistant research director at Telsey Advisory Group, says the savings from lower gas prices and the wealth effect shielded consumers from the economic headwinds. SOUNDBITE: JOSEPH FELDMAN, ASSISTANT RESEARCH DIRECTOR, TELSEY ADVISORY GROUP (ENGLISH) SAYING: "Importantly, asset values are up. Home values are up. People feel more confident in their homes. The stock market's up. Not to say that everyone has a big investment in the stock market, but to the extent they have 401ks and those values have gone up. They feel a little bit more wealthy. And I think they feel there's more confidence in their ability to spend because they feel a little bit richer." Other positive signs: consumers are spending more on discretionary items, like wining and dining, which saw sales rise eight-tenths of a percent. Cars, clothing, and building materials saw the biggest increases. SOUNDBITE: JOSEPH FELDMAN, ASSISTANT RESEARCH DIRECTOR, TELSEY ADVISORY GROUP (ENGLISH) SAYING: "You're seeing housing driving a lot of different sectors in the economy, even something as remote as pets, for example. Petsmart is one of the retailers I cover. And household formation is a big driver of pet adoption." Retail analysts like Alison Jatlow Levy of consulting firm Kurt Salmon are cautiously optimistic about the spring and summer seasons even though economic growth is expected to slow. SOUNDBITE: ALISON JATLOW LEVY, RETAIL STRATEGIST, KURT SALMON & ASSOCIATES (ENGLISH) SAYING: "I think what we saw in April in terms of pent-up demand, it's likely we'll see some of that continue. I also think it's important to note that while consumers were out spending and the figures looked good, I think this was in part due to some promotional activity on the side of retailers." So while retail sales could be good - Feldman's forecasting low single digit growth through the year - it could come at the expense of margins unless retailers control their urge to dole out discounts.