Sales at U.S. retailers rose in February by the most in five months as an improved job market and stronger household finances cushioned the effect of higher payroll taxes.
The 1.1% advance exceeded all projections in a Bloomberg survey and followed a revised 0.2% gain in January, Commerce Department figures showed today in Washington. The median forecast was for a 0.5% advance. Sales excluding the volatile categories of autos and gasoline rose 0.4%.
Progress in the job market is shoring up sentiment and spurring demand at merchants including Costco Wholesale Corp., easing the burden of a two percentage-point increase in the levy that funds Social Security. The boost to household wealth from home values and stock prices has also helped consumers maintain spending in the face of higher fuel prices.
“It shows some steady underlying strength,” said Terry Sheehan, an economic analyst at Stone & McCarthy Research in Princeton, New Jersey, the second-best forecaster of retail sales in the last two years, according to data compiled by Bloomberg. “These numbers are cause for cautious optimism.”
Stock-index futures erased losses after the figures, with the contract on the Standard & Poor’s 500 Index expiring in June rising less than 0.1% to 1,547.4 at 8:47 a.m. in New York.
Estimates of the 82 economists in the Bloomberg survey ranged from a 0.6% decline to a 1% increase. The reading for January was revised from an initially reported gain of 0.1%.
Eight Categories
Eight of 13 major categories showed increases last month, led by a 5% jump in receipts at gasoline stations that reflected higher fuel costs. Sales also climbed at building materials outlets, auto dealers and general merchandise stores.
Spending increased 1.1% at auto dealerships in February after a 0.3% drop a month earlier.
Pent-up demand for motor vehicles contributed to the increase as an aging fleet and cheap borrowing drew customers to dealer lots. Cars and light trucks sold at a faster pace in February, pushing the annualized rate of sales to 15.3 million from 14.4 million a year ago, according to data from Ward’s Automotive Group.
Deliveries at Ford Motor Co. surged 9.3% last month from a year earlier, the best February in six years. At General Motors Co., sales climbed 7.2%, the companies reported March 1.
Gas Stations
The gain in February receipts at service stations was the biggest since August and followed a 0.7% advance in January. Regular gasoline at the pump averaged $3.67 a gallon in February, up from $3.32 the prior month. The Commerce Department’s retail sales figures aren’t adjusted for inflation.
Spending increased 0.2% at clothing chains and 0.5% at general merchandise stores, which was the most in almost a year, today’s report showed. Non-store retailers saw a 1.6% gain in purchases.
Sales excluding autos, gasoline and building materials -- the figures used to calculate gross domestic product -- climbed 0.4% after a 0.3% increase in the previous month.
Gains in demand weren’t universal, as department store receipts fell 1% in February. Same-store sales for 20 companies tracked by Retail Metrics Inc. rose 1.9% in February compared with a year ago, less than the 2.5% forecast. Sales at six of 12 chains reported gains, led by apparel stores including Gap Inc. and Limited Brands Inc.
Retail Hiring
Retailers took on almost 24,000 new employees last month, contributing to a 236,000 increase in payrolls that exceeded the median forecast of economists surveyed, figures from the Labor Department showed last week. The unemployment rate unexpectedly dropped to a four-year low of 7.7%.
The pickup in hiring defied concern that budget battles in Washington would hurt the economic expansion.
A fiscal pact passed by Congress on Jan. 1 gave a permanent tax break to 99% of Americans while allowing a payroll tax used to finance Social Security rise to 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.
Wrangling over the deal forced the Internal Revenue Service to delay accepting and processing 2012 tax returns, which is slowing refunds. Through March 8, taxpayers had received $159 billion in IRS refunds in this fiscal year, compared with $178.3 billion at the same point last year, according to Treasury Department data.
Discount Stores
Costco, the largest U.S. warehouse-club chain that yesterday reported a 39% gain in second-quarter profit, has worked to lure more shoppers to its annual memberships by lowering already-discounted prices. Sales during the period at stores open for more than a year climbed 5%, excluding changes in gas prices and foreign-currency exchange rates.
Some discount and department-store retailers including Wal- Mart Stores Inc. have struggled to boost sales as the tax increase and delayed tax returns take a toll. Wal-Mart, the world’s largest retailer, said Feb. 21 that same-store sales in the first quarter will be little changed. Target Corp., the second-largest U.S. discount chain, said February sales got off to a slow start.
“Given these new challenges facing an already-sluggish economy, we have a tempered view of the near-term sales environment,” Target Chief Executive Officer Gregg Steinhafel said on a Feb. 27 call with analysts. “While there are some encouraging signs in the housing markets, volatility and consumer confidence, the payroll tax increase and rise in the price of gas all present incremental headwinds.”
