KNOXVILLE — After starting the year slowly, consumer spending in Tennessee bounced back in February, a University of Tennessee report says.
UT’s latest index of leading economic indicators rose 6.3 percent in February, as the state recovered from a sharp drop in the index in January.
Dr. Matt Murray, a UT economist, said the rebound was led by a 152.7 percent surge in the state’s taxable sales rate, which suffered a 35 percent drop in January.
Murray said Y2K stockpiling and anticipation of higher interest rates contributed to the February sales surge.
“Some consumers stocked up in December in anticipation of Y2K problems, so in January they spent less,” Murray said. “In February, they may have been trying to beat future interest rate increases, buying early to avoid having to pay higher interest rates.
“The result was a very sharp jump in taxable sales, but a one-month increase does not necessarily indicate a sustained trend toward more consumer spending and tax revenues.”
February taxable sales rose 326 percent in the Tri-Cities, 205 percent in Nashville, 200 percent in Knoxville, 135 percent in Chattanooga, and 38 percent in Memphis.
Murray said such gains are unlikely to continue with recent interest rate hikes. The Federal Reserve’s half percentage point rate hike in May is the largest increase in 5 years.
The February index also showed a 25 percent jump in construction jobs statewide, and a strong labor market with unemployment down 35 percent. Tennessee’s manufacturing hours slid 13.8 percent, and the U.S. leading index dipped 3.3 percent.
The index, compiled by Murray in UT’s Center for Business and Economic Research, analyzes data from the recent past to forecast economic conditions six to nine months in the future.