Retail Sales in U.S. Increase for First Time in 3 Months

Sales at U.S. retailers rose in February for the first time in three months, claims for jobless benefits dropped last week and consumer confidence improved, pointing to an economy regaining traction after a harsh winter slowed demand even more than previously estimated.

The 0.3 percent advance in purchases followed a 0.6 percent drop in January that was larger than initially reported, the Commerce Department in Washington said. Unemployment claims unexpectedly fell to a more than three-month low and consumer sentiment rose to the second-highest level since August.

The confidence report showed those at the lowest end of the pay scale were becoming less pessimistic, a sign the improving job market will help broaden gains in spending. The extent of the economic damage inflicted by the weather remains open to debate, which means Federal Reserve policy makers will probably continue to trim monthly bond purchases at a measured pace when they meet next week.

“We’ll see a little bit more traction on the consumer side as the weather improves and people get a little bit more willing to leave the house,” said Russell Price, senior economist at Ameriprise Financial Inc. in Detroit and the best forecaster of retail sales over the past two years, according to data compiled by Bloomberg. Still, the gain in February “has to be considered against the negative revisions to January and December.”

Stocks fell, erasing this year’s gains for the Standard & Poor’s 500 Index, as weaker-than-forecast data from China and tension in Ukraine overshadowed today’s economic data. The S&P 500 declined 1.2 percent, the most since Feb. 3, to 1,846.34 at the close in New York.

Economists’ Forecasts

The median forecast of 84 economists surveyed by Bloomberg called for a 0.2 percent advance in retail purchases. Estimates ranged from a 0.2 percent drop to a 0.6 percent gain. The decline in January, revised from an initially reported 0.4 percent decrease, was the biggest since March. December receipts were also weaker -- down 0.3 percent compared with a previously estimated 0.1 percent drop.

Another report from the Labor Department showed first-time claims for unemployment benefits dropped by 9,000 to 315,000 in the week ended March 8. Employers cutting back on dismissals may be encouraged to take on more workers as demand rebounds. Payrolls increased by 175,000 in February after a 129,000 gain that was more than initially estimated, the agency said March 7.

“The labor market continues to improve,” said Brian Jones, senior U.S. economist at Societe Generale in New York who accurately forecast the number of claims. “The economy is not in a soft patch.”

Consumer Comfort

Improving conditions in the job market help explain why households are more upbeat. The Bloomberg Consumer Comfort Index climbed to minus 27.6 in the period that ended March 9 from minus 28.5 the prior week.

The advance was the fifth straight and the reading was second only to the minus 27.4 in the week ended Dec. 22 as the strongest since mid-August. Americans were more optimistic about the economy than at any time in the last seven months.

The Bloomberg gauge of whether it’s a good time to buy also increased. The report showed sentiment improved for those making less than $15,000 a year, reaching the highest level since August.

“Better employment prospects and a reduced pace of firings in the economy has bolstered confidence in the broader economy,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “Improved sentiment among lower-income groups is particularly important and will likely support growth later this year.”

The labor market is also showing signs of picking up in Australia. The number of people employed full-time rose by 80,500 in February, the biggest increase since August 1991, after the country’s last recession.

Broad-based Gain

The rebound in U.S. retail sales was broad-based with nine of 13 major categories showing increases. The gains were led by non-store retailers, which include Internet merchants such as Inc., indicating some customers were still struggling with poor weather and preferred to shop from the comfort of home. The category that includes purchases made online climbed 1.2 percent in February, the most since July 2013.

Other areas showing gains in February included sporting goods, where purchases increased 2.5 percent, and department stores, which showed a 0.7 percent gain. Both advances were the biggest since January 2013.

The South Atlantic region of the U.S. experienced the most snowfall during the second week of February since 1983 and New England registered the most in 20 years during the period, according to Planalytics Inc., a Berwyn, Pennsylvania-based weather-data provider. February’s winter blitz followed the chilliest January in three years.

GDP Input

The retail sales figures used to calculate gross domestic product, which exclude categories such as food services, auto dealers, home-improvement stores and service stations, showed a 0.3 percent increase in February after a 0.6 percent drop the prior month that was also larger than previously estimated, today’s report showed.

More jobs, higher home prices and strong equity returns may be giving consumers the means to spend, with household wealth rising by $2.95 trillion in the fourth quarter to a record $80.7 trillion, according to data from the Fed.

Macy’s Inc. is among businesses predicting that warmer weather will also bring a boost in sales.

‘Right Back’

“February started off like here we go again,” Terry Lundgren, chief executive officer at Macy’s, said at a conference on March 11. “All of a sudden, Valentine’s Day came and the business turned and also the weather began to normalize and not everywhere, but in certain parts of the country, and when it did, the business came right back.”

Fed Chair Janet Yellen last month said the central bank is likely to keep trimming asset purchases, even as it monitors recent reports to “try to get a firmer handle on exactly how much of that set of soft data can be explained by weather and what portion, if any, is due to softer outlook.”

Policy makers anticipate that “economic activity and employment will expand at a moderate pace this year,” she said to the Senate Banking Committee on Feb. 27.