Retail Sales in U.S. Probably Rose on Labor Market Gains

Sales at U.S. retailers probably grew in January as an improving job market helped consumers cope with an increase in the payroll tax, economists said before a report this week.

The projected 0.1 percent rise would follow a 0.5 percent advance in December, according to the median forecast in a Bloomberg survey of 68 economists before Feb. 13 figures from the Commerce Department. Another report may show factory production is expanding.

Employment gains are shoring up consumer sentiment and boosting sales for retailers such as Gap Inc. and Target Corp., even as a two percentage-point rise in the tax that funds Social Security trimmed paychecks. Higher home values and stock prices are also bolstering household wealth, giving an added lift to the purchases that account for about 70 percent of the economy.

“The longer-term prognosis here is a little bit better,” said Michael Brown, an economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “We are starting to see personal income grow a little bit due to additional job creation.”

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.

More Jobs

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.

The stock market also is showing signs of strength. The Standard & Poor’s 500 index climbed 5 percent 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.

Demand for automobiles as consumers replace older cars and trucks is benefiting automakers such as Ford Motor Co. and General Motors Co.

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. Ford’s deliveries surged 22 percent last month compared with January 2012 and General Motors sales climbed 16 percent, the companies reported Feb. 1.

Household purchases climbed at a 2.2 percent annual rate in the final three months of 2012, up from 1.6 percent in the third quarter, Commerce Department data show.

Payroll Tax

Improving confidence and more jobs may help stem any setback this quarter as consumers grapple with an increase in the payroll tax, which Congress allowed to revert to its 2010 level of 6.2 percent from 4.2 percent starting in January. A worker earning $50,000 a year is taking home about $83 less a month because of the higher levy.

“Over the next month or two, I think we’re seeing consumers sort of internalize the tax-policy changes,” said Well Fargo’s Brown. “I think we’ll sort of move past that.”

The Thomson Reuters/University of Michigan consumer sentiment gauge rose to 74.8 in February from 73.8 the prior month, economists surveyed project a preliminary report on Feb. 15 report will show. It would be the second consecutive gain after the index reached a five-month low in December.

In addition to improving consumer demand, factories are also benefitting from a pickup in exports and business investment. Industrial production climbed 0.2 percent in January after a 0.3 percent advance the previous month, according to the Bloomberg survey median before the Federal Reserve data Feb. 15.

Exports increased 2.1 percent in December from the prior month to $186.4 billion, the second-highest on record, figures from the Commerce Department showed last week.

Other reports this week may show manufacturing in the New York area shrunk at a slower pace this month and business stockpiles were little changed in December, according to economists surveyed.

                       Bloomberg Survey

==============================================================
                        Release    Period    Prior     Median
Indicator                 Date               Value    Forecast
==============================================================
Retail Sales MOM%         2/13      Jan.      0.5%      0.1%
Retail ex-autos MOM%      2/13      Jan.      0.3%      0.1%
Retail exauto/gas MOM%    2/13      Jan.      0.6%      0.4%
Retail control MOM%       2/13      Jan.      0.6%      0.3%
Business Inv. MOM%        2/13      Dec.      0.3%      0.3%
Initial Claims ,000’s     2/14     9-Feb      366       360
Empire Manu. Index        2/15      Feb.      -7.8      -2.0
Ind. Prod. MOM%           2/15      Jan.      0.3%      0.2%
U of Mich Conf. Index     2/15     Feb. P     73.8      74.8
==============================================================

To contact the reporter on this story: Michelle Jamrisko in Washington at mjamrisko@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz in Washington at cwellisz@bloomberg.net

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