The 0.1 percent gain in purchases last month followed a 0.4 percent increase in November, according to figures from the Commerce Department released today in Washington. The median estimate in a Bloomberg News survey called for a 0.3 percent rise. Another report showed more Americans than projected filed claims for jobless benefits last week.
Merchants like Williams-Sonoma Inc. (WSM) cut prices during the most important shopping season of the year amid concern stagnant wages and lower property values would hold customers back. The slowdown in demand means households are looking to rebuild savings after spending jumped early in the fourth quarter, showing further job gains are needed to fuel purchases.
“A lot of the euphoria around the holiday shopping season was misplaced,” said Neil Dutta, an economist at Bank of America Corp. in New York, which correctly forecast the gain in sales. “The weakness in December implies that the handoff into the first quarter was weak. The savings rate is going higher and that’s going to be a headwind for consumer spending.”
Stocks rose, sending the Standard & Poor’s 500 Index higher for a fourth day, as a drop in borrowing costs at debt auctions in Europe helped overcome the disappointing economic data. The S&P 500 climbed 0.2 percent to close at 1,295.5 in New York.
Euro-area industrial production declined for a third month in November, adding to signs the economy failed to grow in the fourth quarter, a report showed today. Output in the 17-nation euro area dropped 0.1 percent from a month earlier, the European Union’s statistics office said in Luxembourg.
In Asia, China’s consumer inflation rate fell to a 15-month low in December and producer-price gains were the smallest in two years, leaving the government more room to support growth as a global slowdown hurts exports.
Jobless claims in the U.S. climbed by 24,000 to 399,000 in the week ended Jan. 7, Labor Department figures also showed today. The median forecast of 46 economists in a Bloomberg survey projected 375,000.
Hiring by package-delivery companies and retailers during the holidays to meet demand for gifts may now be giving way to an increase in dismissals. At the same time, claims figures are subject to greater volatility during this time of year, as the government has trouble adjusting the data for the seasonal swings in employment.
“There is usually a surge in seasonal layoffs at this time, and that is what’s happening here,” said Jonathan Basile, a senior economist at Credit Suisse in New York, who projected claims would jump to 405,000. “Claims have shown an improving trend. It’s a vote of confidence for continued improvement in the labor market.”
More jobs will be needed to support spending. Retail sales were projected to accelerate after rising a previously reported 0.2 percent in November, according to the Bloomberg survey. The 75 economists’ estimates ranged from a decline of 0.2 percent to a gain of 0.9 percent.
Shares of Williams-Sonoma fell the most in more than three years after the owner of the namesake, Pottery Barn and West Elm home-goods chains said profit may be less than previously forecast because of holiday price-cutting.
Chief Executive Officer Laura Alber said Williams-Sonoma faced “greater challenges” because of discounting on nationally branded products. Sales at all stores open at least a year fell 0.3 percent in the two-month holiday period ended Dec. 26, compared with a 5 percent gain a year earlier, the San Francisco-based company said in a statement.
For all of 2011, retailers enjoyed their strongest sales year since 1999. Purchases climbed 7.7 percent after a 6.5 percent gain in 2010, today’s Commerce Department report showed.
Seven of 13 major categories showed gains last month, led by a 1.5 percent jump at car dealerships. Purchases excluding automobiles fell 0.2 percent, the first decline since May 2010.
The auto data ran counter to industry reports that showed cars and light trucks sold at a 13.5 million seasonally adjusted annualized rate in December following a 13.6 million pace the prior month, according to researcher Autodata Corp. Nonetheless, demand posted the best back-to-back months since May-June 2008.
Ford Motor Co. (F), the second-largest U.S. carmaker, posted a 10 percent gain in sales last month from a year earlier, and closed out 2011 with 2.15 million light vehicles purchased, an 11 percent gain.
“We were able to end the year on, what we feel, is a high note,” Erich Merkle, Ford’s U.S. sales analyst, said on a conference call Jan. 4. “December was a strong number.”
Building-material outlets, furniture and clothing stores were also among the gainers last month. Electronics stores last month showed the biggest decline in sales since March 2009, leading the categories showing loses. Declines also included service stations, as gasoline prices dropped, and Internet retailers.
Sales excluding autos, gasoline and building materials, which render the figures used to calculate gross domestic product, fell 0.2 percent after a 0.3 percent increase the prior month and a 0.5 percent gain in October.
A plunge in same-store sales in the first week of 2012 raises the risk that the disappointing December results will carry over into the new year.
Demand at stores open at least a year dropped 5.4 percent in the week ended Jan. 7 from the previous seven days, the largest decline since records began in September 1989, according to International Council of Shopping Centers and Goldman Sachs Weekly Chain Store Sales Index released on Jan. 10.
The January data “give reason to be cautious about whether what we saw in December is going to continue on to the first quarter,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. “We have to wait a little longer to see if December was an aberration or if there is a step down in the pace of spending growth.”
In a note to clients today Feroli said JPMorgan is preparing to revise its first-quarter growth forecast to reflect the fact that “the weak finish” at the end of 2012 bodes poorly for the start of the year.
Spending will climb at a 2 percent annual rate this quarter after expanding at a 2.5 percent pace in the last three months of 2011, according to the median forecasts of economists surveyed by Bloomberg from Jan. 6 to Jan. 11.
The figures follow a report earlier this month that showed improvement in the labor market may help sustain spending. Employers added 200,000 jobs in December, twice as many as the prior month, and the unemployment rate dropped to 8.5 percent, the lowest level in almost three years, Labor Department data showed Jan. 6. Hours worked and earnings also picked up.
Other reports today showed that consumer sentiment climbed last week to the highest level since July and companies added to inventories at a slower pace in November.
The Bloomberg Consumer Comfort Index (COMFCOMF) was minus 44.7 in the period ended Jan. 8 from minus 44.8 the prior week. It’s increased in four of the past five weeks.
Stockpiles (MTIBCHNG) at all companies climbed 0.3 percent after rising 0.8 percent rise in October, the Commerce Department also reported. The increase matched the gain in sales.
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