WASHINGTON -- U.S. consumers spent freely in the first six weeks of the year, offering more evidence the economy is growing faster than Federal Reserve policymakers and other analysts expect, figures released yesterday showed.
Retail sales grew 0.5 percent in early February, following a revised 1.0 percent increase in January -- 10 times the increase initially reported. "It certainly will raise questions about whether it's realistic for the Fed to assume the economy will slow much because of Asia," said Michael Englund, chief economist at Standard & Poor's MMS in Belmont, Calif.
Separately, the Labor Department reported first-time applications for state unemployment benefits fell 7,000 last week to a seasonally adjusted 298,000, the lowest level since last July. With jobs plentiful, consumer confidence at record levels and wages rising, the economy seems to be feeding on itself.
"The level of activity in the stores would indicate that consumers were willing to go out and shop last month," said Robert Burton, director of investor relations at Kmart Corp., where sales at stores open at least a year rose 5.6 percent in February. "It was above our expectations, and we certainly are hopeful that that will continue."
Economists and Fed officials watch consumer spending carefully because it accounts for two-thirds of the economy. "If it weren't for the Asia uncertainties, the Fed might be very concerned" this level of consumer spending could lead to inflationary pressures, said Gary Thayer, senior economist at A.G. Edwards & Sons in St. Louis.
A Labor Department report said import prices fell 0.8 percent last month, pushed down by declines in costs for industrial products, textiles and chemicals -- and a 7.4 percent drop in petroleum prices.
Prices of U.S. exports fell 0.2 percent in February.
While the economy began the year with a full head of steam, U.S. central bankers still expect growth to slow in the coming months as Asia's financial crisis constrains U.S. exports. Falling import prices, meanwhile, are expected to hold down inflation.
While inflation remains low -- analysts expect tomorrow's producer price report to show prices fell 0.2 percent in February -- growth continues apace. The jobless rate fell to a quarter-century low of 4.6 percent last month, while average hourly earnings rose, giving consumers the confidence to spend.
The Commerce Department retail sales figures cover only the first two weeks of the month, and are revised as more data become available. The details of the February report showed that sales of big-ticket, durable goods -- including autos, appliances and furniture -- rose 0.5 percent during February after rising 1.3 percent in January.
Sales of such items were expected to rise, since housing has been a pillar of strength for the economy. In January, sales of new single-family homes posted their largest gain in more than ++ four years.
Pub Date: 3/13/98