Recent readings on consumer confidence and unemployment haven't been overly bullish, which is why today's retail sales report is extra heartening.  Last month retail sales actually picked up .3 from the prior month bucking economists' expectations that the Commerce Department's headline number would fall.  And the strength in the sales numbers was broad-based, which underscores that it wasn't any one category skewing the February reading.  Take out the auto sales numbers and the increase last month was nearly three times as strong as the headline number.

Economist, David Resler, at Nomura Global Economics notes that retail sales rose despite fears that winter storms would keep shoppers squirreled away at home.  In fact, according to a research note, he says the weather might have actually, "...spurred sales of snow removal equipment (building supply stores) and winter clothing (apparel stores) , encouraged hoarding (food stores), and boosted demand for home entertaining (electronics and furniture -- think recliners for snow-bound couch potatoes) or all of the above (department stores)."  Interesting!

Resler further notes that whatever the reason Americans were out shopping last month, the results are impressive.  But he also cautions that credit conditions will likely constrain future consumer spending, which represents roughly two thirds of our G.D.P. 

The credit markets are indeed thawing for big institutions (a key ingredient to fueling an economic recovery). However, credit for small businesses and consumers is still tight.  Hopefully, in the not-too-distant future there will be a trickle down effect from the big banks to the smaller banks.  Small businesses account for just over half of private sector employment in the U.S., according to the Small Business Administration, and they often count on smaller, community banks for business loans.  Fortified with new loans they can start hiring again and then we would likely see that retail sales number will continue to climb.

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