Retail sales jump, but by how much?

The fact that retail sales were up 1.1 percent made headlines in the major business papers and web sites.

But the placement of the so-called core number, the one most watched by economists and other market analysts, in various stories is something to note.

The New York Times put the core number in the fourth paragraph and spent several focusing on it near the top of the story:

Retail sales in the United States rose more than expected in February, suggesting that consumer spending this quarter will hold up despite higher taxes.

The Commerce Department said on Wednesday that retail sales increased 1.1 percent last month, the largest rise since September, after a revised 0.2 percent gain in January.

Economists polled by Reuters had expected retail sales, which account for about 30 percent of consumer spending, to rise 0.5 percent last month after a previously reported 0.1 percent gain in January.

So-called core sales, which strip out automobiles, gasoline and building materials and correspond most closely with the consumer spending component of gross domestic product, rose 0.4 percent after advancing 0.3 percent in January.

The rise in core sales was the latest suggestion of momentum in the economy even as fiscal policy tightened, marked by the end of a 2 percent payroll tax cut and an increase in tax rates for wealthy Americans in January.

The gains in core sales in the first two months of the year offered hope that consumer spending, which accounts for about 70 percent of the American economy, might not be slowing much this quarter after growing at a 2.1 percent annual rate over the last three months of 2012.

The first mention of core sales in the Wall Street Journal story was in the seventh paragraph and didn’t last long:

Retail sales excluding gasoline, automobiles and building materials—a figure watched closely by economists who use it as a truer gauge of consumer behavior—was up 0.36% in February, the Commerce Department said.

“The combination of higher gasoline prices and higher payroll taxes limited household purchasing power at the start of (the first quarter),” economists with UBS Investment Research said earlier this week. “That said, a strengthening labor market, rising tax refunds and a more confident consumer should provide important support to the consumer later in the quarter.

Wednesday’s report showed spending dropped 1% at department stores and 0.7% at restaurants. Building material sales remained elevated, rising 1.1%, although that could be because of rebuilding efforts in the aftermath of superstorm Sandy.

While the top of the Reuters story was positive, it still put the core sales number in the fifth paragraph, again giving it a bit more significance:

Retail sales expanded at their fastest clip in five months in February, the latest sign of momentum for an economy facing headwinds from higher taxes and pricier gasoline.

The solid sales last month comes on the heels of strong gains in employment and manufacturing. But the improvement in the economic picture is likely insufficient to shift the Federal Reserve from its very accommodative monetary policy stance.

“The economy in February is looking solid. None of this, however, is likely to cause the Fed to change tack in the near term,” said John Ryding, chief economist at RDQ Economics in New York.

Retail sales increased 1.1 percent, the largest rise since September, after a revised 0.2 percent gain in January. That was well above economists’ forecasts for a 0.5 percent advance.

The upbeat report helped to lift to the dollar to a seven-month high against a basket of currencies. Prices for U.S. government debt fell and stocks on Wall Street slipped after a recent rally.

It’s interesting to see the difference in the treatment of the number that seems to be the most watched by traders and economists. It just shows that it pays to read beyond the first couple of paragraphs to make sure that you’re getting the full story.

Liz Hester