Retail Sales Jump, But Will Rising Gas Prices Hurt?
JACKI LYDEN, HOST:
I'm Jacki Lyden and this is TELL ME MORE from NPR News. Coming up, a new documentary explores a South Side Chicago public school that feels like a gallery of African art. We'll chat with "The Curators of Dixon School" filmmaker in just a few minutes.
But first to matters of personal finance. Today the Commerce Department is out with new details on retail sales for July and these latest numbers are giving us some hint as to what the back to school sales tell us about the economy in general.
With us to talk more about it is NPR's senior business editor, Marilyn Geewax. Welcome back to the program.
MARILYN GEEWAX, BYLINE: Hi, Jacki.
LYDEN: Nice to have you here.
LYDEN: What do we know so far about back to school sales, Marilyn?
GEEWAX: Today, we got a report from the Commerce Department and it showed that in July, retail sales jumped up. Now, it's been a bad year, for the most part, for retail sales. They were really lackluster in spring. This is the best number since February and it's good because it suggests that back to school sales will be fairly good this year. That's the second most important shopping season of the year. It's second only to the holiday season in December.
So retailers were watching for this number and they were hopeful already this year because, you know, we've had a little bit of a baby boom. Remember back in 2003 to 2007, people were buying homes like crazy? Well...
LYDEN: When times were good or felt like they were when we were all overextending?
GEEWAX: They felt like they were good.
GEEWAX: But what happened was people were adding bigger houses. They got more bedrooms and they added babies, and those babies are starting first grade, kindergarten now, so we had - 4.3 million babies were born in 2007 and that was up sharply from only four million babies in 2002, so all those little kids are heading off to school and that should help.
LYDEN: So does that mean that all these traditional retailers who serve that market are doing well?
GEEWAX: Well, in general this year what we've seen is that the higher end retailers are doing well and more of the discount and dollar stores do well, but there is a middle class squeeze, so it's a little bit tighter for retailers in the middle.
LYDEN: Marilyn, I noticed recently that gas prices are rising again. This being the peak of the back to school summer vacation season, is that going to hurt the economy?
GEEWAX: That's something that retailers are watching very carefully and they're worried about. We've seen gasoline prices go up about 30 cents a gallon in just the past month. Now, have we peaked? It's hard to say, but you know, it certainly isn't good when people are spending more at the pump than they are at the store for all kinds of goods. It would be better for the economy if shoppers had a little bit more money in their pockets.
LYDEN: What about the drought and food prices? That's something that's really been in the news.
GEEWAX: That's another thing, is we got a report, again today, a different report. It had to do with wholesale prices and it showed that the drought is starting to have an impact on food prices, especially corn, soybeans, and that's beginning to work its way through this whole system.
Now, in general, inflation is fairly tame, but these wholesale numbers we got today suggest that it's probably going to start to cause a little more inflation this fall, especially for anything related to oil and food.
LYDEN: This is TELL ME MORE from NPR News. We're talking about the latest retail sales numbers and consumer confidence figures with NPR senior business editor Marilyn Geewax. July's numbers are the strongest we've seen in months, but it's not entirely good news.
Marilyn, do you have any advice in your personal consulting mode about how - what people should keep in mind while they do their back to school shopping?
GEEWAX: Well, I'm not an advisor myself, but I do follow economists and what financial analysts say, and I think if anything we've learned over the last five years it's to stay out of deep debt, and what we got - again, a different report today that showed that consumers are increasing the amount of debt that they have, but so far they're managing it well. They're not very - falling behind. We're not seeing the problems with delinquency that we saw a couple of years ago. So that's good. But you've got to keep out of that debt and be very careful.
And one of the things that people are being urged to do this year is when you send the kids off to college, instead of giving them a credit card, where they might go a little crazy, it's better to use those prepaid gift cards. Send them off to buy that beanbag chair for the dorm room with a gift card so they know what the cap is and they can't overspend that way. So that's one way to avoid debt.
Another thing is shopping with layaway. Don't buy things until you have the cash to do so. So avoiding credit holes is something that I think we've all learned over the last couple of years.
LYDEN: We went out here at NPR with some people who were doing some shopping and I'd like to play you a clip of tape. This is Lisa Miser(ph). She's a mother of two from Twinsburg, Ohio. They were doing a bit of back to school shopping.
LISA MISER: Yeah. We're kind of waiting. They don't need long pants and winter coats and things like that until farther in the school year, so even though they're in the stores now, we're not buying them yet. We'll wait until the weather changes and they go on sale more.
LYDEN: It kind of reminds me of books of my youth where the kids - farm kids got new shoes at the beginning of the fall season. But what she's saying is, look, I'm delaying my purchases. Is that a smart move?
GEEWAX: Yes. I think, when you look at where gasoline prices are going and food prices are going, you might be in a situation where you need a little more money this fall. Why shop now for something you really don't need until maybe December or January? Advisors are saying, generally speaking, it is better to wait and see what your real needs are than to just go crazy in July and August and buy things that you think you might need in January. So this approach is probably pretty sensible in an economy where the unemployment rate is still 8.3 percent and we see these rising gasoline and food prices.
LYDEN: Given what you just said, I imagine consumer confidence is not yet robust.
GEEWAX: That's right. We've seen - consumer confidence has not really been great this year, and when you've got a tough job market like this, people are going to remain wary. But it becomes kind of a cycle. If people spent more at retail, it could help create more retail jobs and that would help the unemployment rate, but people don't want to spend yet because they're still watching those jobless numbers.
We really need to break out of this cycle of wariness, but it really hasn't happened yet. The economy's growing about one and a half percent, maybe two percent, and that's still pretty slow for boosting confidence.
LYDEN: Marilyn Geewax is NPR's senior business editor and she joined us in our studios here in Washington, D.C. Always a pleasure to have you.
GEEWAX: Oh, it was great to be here. Thanks, Jacki.
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