Wednesday, March 16, 2005

Consumers keep spending more

Retail sales rose 0.5% in February
WASHINGTON - Retail sales, bolstered by a rebound in demand for autos, rose a healthy 0.5 percent in February, the Commerce Department reported Tuesday. In addition to a solid sales performance last month, the government revised sharply higher its estimate for sales activity in January, showing a gain of 0.3 percent rather than the original estimate that sales had fallen by 0.3 percent at the beginning of the year. Taken together, the two months showed that the consumer buying spree that began with a 1.3 percent sales surge in December was continuing in the new year
The January revision is interesting. Everyone was talking about how things seemed to falter in January and now we see that it was bad data. As for the source of the increased spending, they blame decreasing marginal tax rates (which increase disposable income) and lower interest rates which help consumers buy big ticket items.
Since the recession ended in November 2001, consumers have been the standout performers for the economy, a surge in spending that was bolstered by President Bush's sizable tax cuts and easy credit fostered by the Federal Reserve's low interest rates.

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