Consumer Demand Sluggish in February

March 18, 2008--Sluggish consumer demand and a slowing of the rise in energy prices caused the Consumer Price Index to remain steady in February. Consumers pulled back on spending during February, as retail sales fell 0.6%. Finally, the trade balance grew in January to $58.2 billion.

 

Consumer Price Index
The consumer price index held steady for February, following a 0.4% in January. Weak demand from consumers, coupled with a slower rate of growth energy prices in February kept inflation in check. The core CPI, which excludes food and energy prices, was also unchanged for the month. On a year-ago basis, the top-line CPI has increased 4.1% while the core CPI is up 2.3%.

 

Retail Sales
Total retail sales surprisingly plunged 0.6% in February, after an upwardly revised increase of 0.4% in January. Spending fell most significantly at auto dealers (-2.2%), gas stations (-1.0%), building supply stores (-0.7%), and furniture stores (-0.5%). Core sales, or those excluding the purchases of autos and gasoline station sales, decreased 0.3% for the month. On a year-to-year basis, top-line retail sales increased 2.6%. Consumers appear reluctant to spend on nonessentials, as record high energy prices, limited credit, and increasing unemployment take their toll.

 

International Trade
The trade deficit widened in January, increasing $0.34 billion to $58.2 billion, a 0.6% increase. Exports increased 1.6% to $148.2 billion. Also, imports increased 1.3% to $206.4 billion. With the weak dollar and the sluggish US economy, the trade balance should narrow into the future, as demand for imports will fall while US goods will become cheaper on the world market. However, the high cost of oil may limit significant reductions in the trade balance.