Spending cooled off in January

  • Wednesday, February 13, 2002 9:00pm
  • Business

Associated Press

WASHINGTON — Consumers trimmed their spending on cars as free-financing offers waned, contributing to a modest drop in sales at the nation’s retailers in January.

Outside of autos, sales rose by the largest amount in nearly two years, a promising sign as the country tries to come out of a recession.

Bargain-hungry shoppers last month snapped up clothing that had been heavily discounted and spent briskly on other items, including building supplies, health and beauty products, and home furnishings.

Although overall retail sales dipped by 0.2 percent in January after rising by that same amount the month before, virtually all of the weakness came from a drop in car and truck sales. Excluding auto sales, sales rose by 1.2 percent in January, the biggest advance since March 2000, the Commerce Department reported Wednesday.

That encouraged economists and Wall Street investors. The behavior of consumers, whose spending accounts for two-thirds of all economic activity, will play a key role in the strength and timing of an expected economic rebound this year, analysts said.

"Consumers, who have kept the economy from drowning during this recession, continued to spend, albeit cautiously in January and may be leading the way to recovery," said Oscar Gonzalez, an economist at John Hancock.

On Wall Street, the latest retail sales figures inspired a rally. The Dow Jones industrial average closed up 125.93 points at 9,989.67.

The economy slid into recession in March but consumer spending has managed to hold up relatively well during the slump. Low interest rates, free-financing offers, extra cash coming from a refinancing boom in home mortgages and heavily discounted merchandise have induced people to spend. Consumer confidence also has improved.

"Consumers are doing their part to help the U.S. economy," said Lynn Reaser, chief economist at Banc of America Capital Management. "They are starting the year with a more optimistic mood and willingness to spend."

After cutting short-term interest rates 11 times last year, the Federal Reserve last month cited signs of an economic rebound in deciding against another cut. The Fed’s actions had the effect of pushing the prime lending rate — a benchmark for many consumer and business loans — down to its lowest point since late 1965.

The dip in overall retail sales last month largely reflected a 4.3 percent drop in auto sales. zero-interest-rate financing and other incentives helped to produce a record increase in auto sales in October, but sales have fallen since then as those incentives have waned.

There were other weak spots in Wednesday’s report. Sales of electronics and appliances fell by a record 3.6 percent in January, after rising by 2.1 percent the month before. And, people ate out less. Sales at bars and restaurants declined by 2 percent, following a 4.9 percent increase.

Copyright ©2002 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Business

A closing sign hangs above the entrance of the Big Lots at Evergreen and Madison on Monday, July 22, 2024, in Everett, Washington. (Ryan Berry / The Herald)
Big Lots announces it will shutter Everett and Lynnwood stores

The Marysville store will remain open for now. The retailer reported declining sales in the first quarter of the year.

George Montemor poses for a photo in front of his office in Lynnwood, Washington on Tuesday, July 30, 2024.  (Annie Barker / The Herald)
Despite high mortgage rates, Snohomish County home market still competitive

Snohomish County homes priced from $550K to $850K are pulling in multiple offers and selling quickly.

Henry M. Jackson High School’s robotic team, Jack in the Bot, shake hands at the 2024 Indiana Robotics Invitational.(Henry M. Jackson High School)
Mill Creek robotics team — Jack in the Bot — wins big

Henry M. Jackson High School students took first place at the Indiana Robotic Invitational for the second year in a row.

The computer science and robotics and artificial intelligence department faculty includes (left to right) faculty department head Allison Obourn; Dean Carey Schroyer; Ishaani Priyadarshini; ROBAI department head Sirine Maalej and Charlene Lugli. PHOTO: Arutyun Sargsyan / Edmonds College.
Edmonds College to offer 2 new four-year degree programs

The college is accepting applications for bachelor programs in computer science as well as robotics and artificial intelligence.

FILE — Boeing 737 MAX8 airplanes on the assembly line at the Boeing plant in Renton, Wash., on March 27, 2019. Boeing said on Wednesday, Feb. 21, 2024, that it was shaking up the leadership in its commercial airplanes unit after a harrowing incident last month during which a piece fell off a 737 Max 9 jet in flight. (Ruth Fremson/The New York Times)
Federal judge rejects Boeing’s guilty plea related to 737 Max crashes

The plea agreement included a fine of up to $487 million and three years of probation.

Neetha Hsu practices a command with Marley, left, and Andie Holsten practices with Oshie, right, during a puppy training class at The Everett Zoom Room in Everett, Washington on Wednesday, July 3, 2024. (Annie Barker / The Herald)
Tricks of the trade: New Everett dog training gym is a people-pleaser

Everett Zoom Room offers training for puppies, dogs and their owners: “We don’t train dogs, we train the people who love them.”

Andy Bronson/ The Herald 

Everett mayor Ray Stephenson looks over the city on Tuesday, Jan. 5, 2015 in Everett, Wa. Stephanson sees  Utah’s “housing first” model – dealing with homelessness first before tackling related issues – is one Everett and Snohomish County should adopt.

Local:issuesStephanson

Shot on: 1/5/16
Economic Alliance taps former Everett mayor as CEO

Ray Stephanson will serve as the interim leader of the Snohomish County group.

Molbak's Garden + Home in Woodinville, Washington will close on Jan. 28. (Photo courtesy of Molbak's)
After tumultuous year, Molbak’s is being demolished in Woodinville

The beloved garden store closed in January. And a fundraising initiative to revitalize the space fell short.

Everett Mayor Cassie Franklin, Advanced Manufacturing Skills Center executive director Larry Cluphf, Boeing Director of manufacturing and safety Cameron Myers, Edmonds College President Amit Singh, U.S. Rep. Rick Larsen, and Snohomish County Executive Dave Somers participate in a ribbon-cutting ceremony on Tuesday, July 2 celebrating the opening of a new fuselage training lab at Paine Field. Credit: Arutyun Sargsyan / Edmonds College
‘Magic happens’: Paine Field aerospace center dedicates new hands-on lab

Last month, Edmonds College officials cut the ribbon on a new training lab — a section of a 12-ton Boeing 767 tanker.

Gov. Jay Inslee presents CEO Fredrik Hellstrom with the Swedish flag during a grand opening ceremony for Sweden-based Echandia on Tuesday, July 30, 2024, in Marysville, Washington. (Ryan Berry / The Herald)
Swedish battery maker opens first U.S. facility in Marysville

Echandia’s marine battery systems power everything from tug boats to passenger and car ferries.

Helion Energy CEO and co-founder David Kirtley talks to Governor Jay Inslee about Trenta, Helion’s 6th fusion prototype, during a tour of their facility on Tuesday, July 9, 2024 in Everett, Washington. (Olivia Vanni / The Herald)
State grants Everett-based Helion a fusion energy license

The permit allows Helion to use radioactive materials to operate the company’s fusion generator.

People walk past the new J.sweets storefront in Alderwood Mall on Thursday, July 25, 2024, in Lynnwood, Washington. (Olivia Vanni / The Herald)
New Japanese-style sweets shop to open in Lynnwood

J. Sweets, offering traditional Japanese and western style treats opens, could open by early August at the Alderwood mall.

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.