Surging retail sales signal an economy on the upswing

Sales boomed 3.8% from March 2013

Americans rushed out to shop as frigid weather lifted in March, propelling retail sales at the fastest pace in a year and a half.

The gauge from the Commerce Department surged 1.1% last month from February in its biggest leap since September 2012. Sales boomed 3.8% from March 2013.

The strong sales, which beat economists' expectations for a 1% increase, bolstered hopes that the economy would continue to gain momentum after struggling through an especially harsh winter.

"One month doesn't answer all the questions, and it's not like we have all-over-the-place exploding growth," said NPD Group analyst Marshal Cohen. "But we're beginning to see that the recovery is no longer segmented — it's broader."

Consumer spending accounts for more than two-thirds of economic output, making retail sales a strong indicator of the nation's overall economic health. But other reports this month also signal a rebound.

Employers created a net 192,000 new jobs in March, according to the Bureau of Labor Statistics, which said that all private sector jobs that were lost in the downturn have been recovered. Initial jobless claims hit their lowest level in nearly seven years.

The International Monetary Fund projects that global economic growth will rise 3.6% this year in the strongest increase since 2011, led by expansion in the U.S. Small-business owners surveyed by the National Federation of Independent Business believe their sales are set to increase.

The government also revised the anemic 0.3% improvement previously reported for February retail sales to a much stronger 0.7% upswing.

Sales had fallen 0.7% in January and 0.3% in December after growing steadily for several months. The spirit of spending slipped away during the winter, analysts said, because consumers were burdened by unexpected heating costs and holiday debt, and were daunted by a series of storms.

But March brought tax refunds and the first tendrils of spring. Pent-up demand pushed shoppers into long-neglected stores.

"We are inclined to view March strength as part of a normalization from a very weak winter, particularly December and January," Credit Suisse analysts wrote in a note to clients Monday.

Auto dealers gave retail sales a substantial boost, with business revving up 3.4% from February. Excluding the category, which can be volatile, retail sales rose 0.7% in the best showing since February 2013.

After removing the effect of vehicles, gas stations and restaurants, sales increased 0.8% month to month and 1.6% from the year-earlier period.

Nearly every type of business enjoyed a sales increase, except electronics and appliance retailers, which suffered a 1.6% decline.

Online sales got a 1.7% lift from February. Building materials and garden equipment, a sector that historically perks up in warmer temperatures, saw sales advance 1.8%.

But some analysts were suspicious of the upturn, noting that many companies have voiced pessimism in recent months.

Electronics retailer RadioShack Corp., where fourth-quarter revenue slid 19%, said in March that it would close up to 1,100 underperforming stores. Office supply giant Staples Inc. said it plans to close up to 225 North American stores.

Last week, Family Dollar Stores Inc. revealed an effort to close 370 stores this year while slashing prices on 1,000 products. The discount retailer said its profit for the second quarter plunged more than 30%.

A recent report from Retail Metrics found that retailers closed the fourth quarter with a 7.1% plunge in earnings, marking their worst performance since 1999.

Even if the winter had been mild, retailers would still have had to resort to heavy discounting to shed leftover inventory from the holidays, said Standard & Poor's analyst Diya Iyer.

"It's a bit early to put too much weight on the retail sales number," she said. "We're hearing from a lot of companies that same-store sales aren't great."

Same-store sales measure revenue from stores open at least a year, which removes the effect of opening and closing stores during the period.

Economists had also braced for retail sales to take more of a hit from a calendar shift that pushed Easter into April this year after helping to pad sales in March 2013.

The National Retail Federation said this month that the average American would spend $137.46 on the holiday this year buying clothing, candy, gifts and more. Easter expenditures nationwide will reach $15.9 billion. That's less than the $17.2 billion in estimated Easter spending last year.

"Easter plays an emotional factor for spring, just like the back-to-school season does for fall," Cohen said. "It doesn't have to have arrived, it just has to be hovering around the corner so shoppers will start to think about it."

Doctor's assistant Linda Edwards, 56, is planning to kick her spring spending up a notch in April by buying drinks, salads and baskets for Easter.

Edwards said she had already pumped up purchases, buying sleeveless tops and rolled-up jeans in March for the warmer weather. She got paint to give her wicker furniture a fresh coat. And she plans to grab some pots to hold the succulent plants she just picked up.

"In February, you're just recuperating from the holidays and enjoying being home in hibernation mode from the cold," she said, while treating herself to a beverage from Coffee Bean & Tea Leaf in the Marketplace shopping plaza in La Crescenta. "But now, this is the time of year I like to shake it up a bit."

Staff writer Jim Puzzanghera contributed to this report.

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