Postwar Boom?

Reports of rising retail sales at chain stores suggested a postwar pickup in consumer spending that could reduce the chances that the Federal Reserve will lower interest rates when it meets next month.

Retail sales at chain stores rose last week at a faster pace than they had for most of the previous month, according to two surveys released today. In one survey, conducted by the Bank of Tokyo-Mitsubishi, sales increased 3.1 percent compared with the week a year earlier, the biggest gain since January.

According to a report in The New York Times, the chain-store numbers are among a handful of indicators receiving close attention from policy makers and investors because the data cover very recent economic activity. The indicators are more volatile than the best-known economic reports, like those on employment and retail sales. But the indicators reflect decisions that consumers and business executives have made since the war with Iraq ended, and they may now offer more insight into the economy's direction, economists say.

The retail numbers released today offered tentative evidence that consumers have become more willing to spend money than they were during the first few months of this year, when sales were lower in some weeks than they were in 2002.

The Bank of Tokyo's index of chain-store sales remained flat during February and March before rising slowly in early April, compared to a year earlier, and last week's increase was only the second one above 3 percent this year. The other survey, the Instinet Research Redbook Average, provided a somewhat less optimistic picture, showing a 1.5 percent increase in sales. Still, that was the biggest increase in three weeks.

“Slowly, in a ragged fashion, the industry is showing better performance,” said Michael Niemira, a senior economist at the Bank of Tokyo. But, he added, “it's not so powerful that everyone is happy.”

At Target Corp. (Minneapolis), sales rebounded last week after disappointing managers early this month, and May sales now appear likely to exceed the company's forecast, it said. Gains were biggest for pharmacy products, baby goods and children's apparel.

Sales projections by Wal-Mart Stores (Bentonville, Ark.) have stayed roughly constant throughout the month, the company said.

The Times notes that surveys of consumer confidence, another indicator offering nearly real-time glimpses of the economy, have also suggested reasons for some optimism. Although many analysts question whether the overall confidence numbers say much about the economy's direction, they say the individual questions within surveys often forecast changes in spending.

One closely followed measure — consumers' near-term expectations for the economy — rose this month, the University of Michigan reported on Tuesday. A second common harbinger of turning points is the percentage of Americans saying they expect the next five years to bring periods of widespread unemployment, and that declined to 36 percent in May, from 51 percent in March, the University of Michigan said.

“This is almost a repeat of what we saw at the end of the first gulf war,” said Richard Curtin, director of surveys at the University of Michigan, who said he thought the economy was improving but still faced problems. “What we have is the first surge in confidence. I think we will see some slide. The question is how much.”