Retail sales in the U.S. rose at a slower pace in January as an increase in payroll taxes took a bite out of consumers’ paychecks.
The 0.1% climb followed an unrevised 0.5% increase in December, Commerce Department figures showed today in Washington. 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% 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 Inc. in New York, whose firm after today’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 U.S. rose in January for the first time in three months, led by more expensive fuel and building materials, a report from the Labor Department also showed today. The 0.6% gain in the import-price index followed a revised 0.5% decline in December that was larger than initially estimated.
Stock-index futures held earlier gains after the reports as President Barack Obama proposed spending on infrastructure and environmental projects in his State of the Union address. The contract on the Standard & Poor’s 500 Index maturing in March rose 0.2% to 1,519.2 at 9:09 a.m. in New York.
Estimates for January retail sales in the Bloomberg survey ranged from a drop of 0.7% to a gain of 0.6%.
Six of 13 major categories showed gains last month, led by a 1.1% 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% 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% last month compared with January 2012 and General Motors sales climbed 16%, the companies reported Feb. 1.
Retail sales excluding autos increased 0.2% after rising 0.3% in December, today’s report showed. They were projected to rise 0.1%, according to the Bloomberg survey median.
Same-store sales for the more than 20 companies tracked by researcher Retail Metrics Inc. surged 4.5% 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% gain in sales, double the average estimate of 4% in a survey by Retail Metrics. Minneapolis-based Target, the second-largest U.S. discounter, posted a gain of 3.1%, above projections of 1.7%.
Purchases excluding autos, gasoline and building materials, which are the figures used to calculate gross domestic product, climbed 0.1% after increases of 0.7% 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% annual rate from October through December, up from a 1.6% pace in the previous three months, according to figures from the Commerce Department. Today’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% annual rate in the fourth quarter as military spending dropped by the most since the Vietnam War era, the Commerce Department reported last month.
The fiscal pact passed by Congress on Jan. 1 avoided sweeping tax increases and made permanent George W. Bush’s income-tax cuts for 99% of Americans. At the same time, the agreement let the payroll tax used to pay for Social Security benefits return to the 2010 level of 6.2%, from 4.2%. A worker earning $50,000 a year is taking home about $83 less a month because of the higher levy.
Additionally, the Internal Revenue Service did not begin accepting and processing 2012 returns until Jan. 30, later than its original Jan. 22 electronic filing start date, due to Congress’ last-minute Jan. 1 tax deal. That, combined with the IRS’s efforts to prevent fraud, may slow refunds.
Steady progress in hiring may ease the pressure on household budgets. Employers added 157,000 workers to payrolls in January after a revised 196,000 rise the prior month and a 247,000 surge in November, Labor Department data showed Feb. 1. Revisions added a total of 127,000 jobs in the last two months of 2012.
Confidence among American consumers rose in the week ended Feb. 3 for the first time this year. The Bloomberg Consumer Comfort Index climbed to minus 36.3 from minus 37.5 the prior period, which was the weakest since early October.
A strengthening stock market also may boost consumer sentiment and spending. The Standard & Poor’s 500 index climbed 5% in January, its biggest gain for the month since 1997. The S&P 500 has rallied for six straight weeks, closing on Feb. 8 at the highest level since November 2007.