Consumer Spending Is Driving Recovery

With business investment growth still slow and no signs of improvement likely until early next year, the strength and sustainability of the budding economic recovery is dependent upon the pace of consumer spending and trends in consumer confidence. Fortunately, the news continues to be reasonably encouraging on both fronts.

The Commerce Department reported a strong 1.2% increase in overall retail and food service sales between March and April. Total sales during April of this year were 4.0% higher than in April 2001—a marked improvement from the overall pace of growth recorded during the second half of 2001 and over the early months of this year.

Over the entire first third of 2002, overall retail and food service sales throughout the United States totaled $1.12 trillion, a value 3.4% more than during the first four months of 2001. Further, if gasoline service stations are excluded, economy-wide retail sales growth has totaled 4.0% so far this year. Gains substantially above the average were recorded in the food services/drinking places category (5.7%), electronics and appliance stores (7.4%), and health and personal care stores (8.9%). Finally, the broad category of "sporting goods, hobby, book, & music stores" showed sales of $25.88 billion during January through April of this year, 8.8% more than over the first third of 2001.