Retail sales slow in January, report shows

Clothing hangs on a rack earlier this month Clothing hangs on a rack earlier this month inside a San Francisco Gap store. Although retail sales overall slowed in January, many of the top retailers, including the Gap Inc., had sales that came in slightly over Wall Street expectations. (Feb. 7, 2013) Photo Credit: Getty Images

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Retail sales in the United States rose at a slower pace in January as an increase in payroll taxes took a bite out of consumers' paychecks.

The 0.1 percent climb followed an unrevised 0.5 percent increase in December, U.S. Commerce Department figures showed Wednesday in Washington, D.C. The advance matched the median forecast of 80 economists surveyed by Bloomberg.

A two percentage-point increase last month in the levy that funds Social Security reduced take-home pay, countering some of the gains in household disposable income from an improving job market.

At the same time, more employment, combined with higher property values and stock prices, supports consumers and adds traction to purchases that make up about 70 percent of the economy, a boon for retailers such as Gap Inc. and Target Corp.

"The payroll tax increase is having some impact on spending here," said Thomas Simons, an economist with Jefferies Group in Manhattan, whose firm after Wednesday's report is the second-best forecaster of retail sales for the past two years, according to data compiled by Bloomberg. "It looks like maybe momentum is not necessarily carrying forward into the first quarter. A lot of the data at this point is going to be kind of a mixed bag and difficult to interpret."

Prices of goods imported into the United States rose in January for the first time in three months, led by more expensive fuel and building materials, a report from the U.S. Labor Department also showed today. The 0.6 percent gain in the import-price index followed a revised 0.5 percent decline in December that was larger than initially estimated.

SECTOR REPORTS

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Six of 13 major categories showed gains last month, led by a 1.1 percent jump at general merchandise stores that was the biggest gain since April 2011. Demand at sporting goods merchants and non-store retailers, which include Internet outlets, also advanced.

Demand at auto dealers fell 0.1 percent in January from the prior month, in line with industry data issued earlier this month. Cars and light trucks sold at a 15.2 million annual rate in January after 15.3 million in December, according to data from Ward's Automotive Group. Including November's 15.5 million rate, auto sales over the past three months have been the strongest in five years.

Demand for automobiles as consumers replace older cars and trucks is benefiting automakers such as Ford Motor Co. and General Motors Co. Ford's deliveries surged 22 percent last month compared with January 2012 and General Motors sales climbed 16 percent, the companies reported Feb. 1.

Retail sales excluding autos increased 0.2 percent after rising 0.3 percent in December, today's report showed. They were projected to rise 0.1 percent, according to the Bloomberg survey median.

Same-store sales for the more than 20 companies tracked by researcher Retail Metrics Inc. surged 4.5 percent in January from the same month in 2012, the biggest year-to-year gain since September 2011.

San Francisco-based Gap, the largest U.S. apparel chain, posted an 8 percent gain in sales, double the average estimate of 4 percent in a survey by Retail Metrics. Minneapolis-based Target, the second-largest U.S. discounter, posted a gain of 3.1 percent, above projections of 1.7 percent.

GROWTH IMPACT

Purchases excluding autos, gasoline and building materials, which are the figures used to calculate gross domestic product, climbed 0.1 percent after increases of 0.7 percent in each of the previous two months. The readings for December and November were revised up from prior estimates indicating consumer spending in the fourth quarter may be stronger than previously estimated.

Household purchases rose at a 2.2 percent annual rate from October through December, up from a 1.6 percent pace in the previous three months, according to figures from the Commerce Department. Wednesday's revisions, combined with a smaller trade deficit than previously reported, probably means the economy managed to grow at the end of last year.

The world's largest economy shrank at a 0.1 percent annual rate in the fourth quarter as military spending dropped by the most since the Vietnam War era, the U.S. Commerce Department reported last month.

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