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Friday, 13 September, 2002, 15:14 GMT 16:14 UK
'Retail therapy' boosts US shop sales
Shoppers in Toys R Us, New York
US consumers are continuing to spend
US consumers are continuing to spend, despite harbouring growing concerns for the future, reports have revealed.

Retail sales grew by a steeper than expected 0.8% last month, Commerce Department figures showed.


Consumers say they are depressed, but they then go out and buy. And that, really, is all that matters

Joel Naroff, Naroff Economic Advisors
Yet a much-watched survey of consumer sentiment revealed declining optimism for the third month in a row.

A sentiment index compiled by the University of Michigan fell to 86.2 this month from 87.6 in August, confounding analysts who had predicted a slight rise in the figure.

"It seems that shopping is the way consumers are trying to rid themselves of their blues," said Joel Naroff, president and chief economist at Naroff Economic Advisors.

Shares fall

The reports, which were blamed in part for a weak start to Wall Street share trading on Friday, will be closely analysed by economists seeking clues as to the effect of recent stock price falls on the economy.

On Thursday, Alan Greenspan, chairman of the Federal Reserve, warned that the US economy was suffering lingering effects from falls in share prices and investment levels, and from last year's 11 September attacks.

Further statistics on Friday, showing zero inflation in wholesale prices, are likely to fuel fears over the fragility of the rebound.

Actions speak louder...

The University of Michigan index has fallen steadily since peaking at 92.4 points in June.


There is still a big question mark as to how long the American consumer can hold out in the face of anaemic jobs growth

Sal Guatieri, Bank of Montreal

But Mr Naroff urged analysts to focus on the actual spending figures.

"I have said this before, and I will probably be saying this again quite often: Watch what consumers do, not what they say," he said.

"They say they are depressed, but they then go out and buy. And that, really, is all that matters."

"Consumer confidence is faltering, there is talk of war with Iraq and we have just come through the emotional first anniversary of the September 11 terrorist attacks.

"August should not have been a good month for retailers, but it sure looks like it was."

Jobs factor

The data was underpinned by a 1.9% rise in car sales, continuing a long-running boom in the market, which has been awash with cut-price financing deals.

But analysts at Societe Generale said the "unexpected strength" revealed in Friday's sales report was growth in trade in other sectors.

"Sales excluding autos and gasoline rose a very strong 0.5%, dispelling the notion that all of current strength in spending is autos driven," a report by the bank said.

But other observers questioned how long the retail boom could continue in the face of a poorly performing US jobs market.

"There is still a big question mark as to how long the American consumer can hold out in the face of anaemic jobs growth," said Sal Guatieri, a Chicago-based economist at Bank of Montreal.


Economic indicators

Fears and hopes

US Fed decisons

IN DEPTH
See also:

13 Sep 02 | Business
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30 Jul 02 | Business
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