Diane Swonk, Chief Economist
Mar. 12, 2010 – 7:40 a.m. CT
Two Steps Forward, One Step Back
Retail sales rose at a better-than-expected 0.3% in February, and SURGED 0.8% – excluding vehicle sales. Unfortunately, the data for January was revised down, and February's data could suffer the same fate down the road.
Moreover, much of the spending is concentrated in the low end of the retail food chain, which is heavily supported by extensions to unemployment insurance and transfer payments. High-end retail remains on life support, if it is still alive at all.
The Bottom Line: The level of activity dropped so low that we have literally nowhere to go but up – especially as repairs and replacements are made. A lot of pent-up demand was created during the recession. The key will be to sustain gains as we move away from government stimulus. We will need to see jobs in order to do that. We're still holding our breath on that front.
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