Retail Sales Off to a Good Start in 2003

The Commerce Department reported a strong 5.0% increase in overall retail and food service sales between January 2002 and January 2003. This increase is 0.9% greater than the December 2002 increase of 4.1% and 1.6% more than the overall 2001-to-2002 comparison. These are all good signs that retail sales are beginning to grow in 2003.

The strongest gains came from gasoline service stations (19.5%), building materials/home improvements (6.2%), health/personal care stores (5.1%), and motor vehicles (5.0%). The weakest gains came from electronics/appliances (0.3%) and sporting/books/music stores (0.2%).

The discrepancy in sales gains speaks to where U.S. consumers are most comfortable spending their disposable income. With interest rates lower than a year ago, consumers seem to be more stimulated to purchase items where they can lock in low interest rates such as homes and automobiles.

Regardless of the low rates on credit cards, consumers are more comfortable with larger purchases, reflected in almost flat sales increases for electronics/appliance and sporting goods/books/music. This point also is illustrated by the modest gains in food service/drinking places, clothing, and furniture.

Depending on what happens with interest rates in 2003, we could assume that the housing and motor vehicle markets will continue to grow.