Retail Sales in U.S. Probably Advanced as Job Market Picked Up

Sales (RSTAMOM) at U.S. retailers probably rose in February for a fourth consecutive month as a better job market and stronger household finances helped consumers adjust to a higher payroll tax, economists said before a report today.

The projected 0.5 percent advance would follow a 0.1 percent gain in January, according to the median forecast in a Bloomberg survey of 82 economists before the Commerce Department’s figures.

Gains in employment and wages are shoring up sentiment and underpinning demand at chains including Costco Wholesale Corp. (COST) Rising home and stock prices are also boosting household wealth, cushioning the economy against the effects of across-the-board government spending cuts that are now taking hold.

“We’re moving along, but it’s not robust,” said Ward McCarthy, chief financial economist at Jefferies LLC in New York and the No. 2 forecaster of retail sales for the past two years, according to data compiled by Bloomberg. The February pickup in sales is “coming on the heels of a pretty anemic reading in January.” McCarthy’s forecast matched the median.

Pent-up demand for motor vehicles probably contributed to the increase in sales last month, as an aging fleet and cheap borrowing costs lured 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.

Auto Sales

Deliveries at Ford Motor Co. (F) surged 9.3 percent last month from a year earlier, the best February in six years. At General Motors Co., sales climbed 7.2 percent, the companies reported March 1.

Receipts at service stations also may have boosted sales as gasoline prices rose. 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.

Retail sales excluding auto dealers and gasoline stations rose 0.2 percent for a second month, according to the survey median.

Gains in demand weren’t universal. Same-store sales for 20 companies tracked by Retail Metrics Inc. rose 1.9 percent in February compared with a year ago, less than the 2.5 percent forecast. Sales at six of 12 chains showed gains, led by apparel stores including Gap Inc. (GPS) and Limited Brands Inc. (LTD)

Holding Up

“January held up pretty well given the tax increase and surge in gas prices, but there are some other data points suggesting that retail sales in February were soft,” said Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, which forecast a February retail sales gain of 0.3 percent.

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 percent.

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 percent of Americans while allowing a payroll tax used to finance Social Security rise to 6.2 percent from 4.2 percent. A worker earning $50,000 a year is taking home about $83 less a month because of the higher levy.

Tax Returns

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.

Costco, the largest U.S. warehouse-club chain that yesterday reported a 39 percent 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 percent, excluding changes in gas prices and foreign-currency exchange rates.

Some discount and department-store retailers including Wal-Mart Stores Inc. (WMT) 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, 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 Corp. (TGT) 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.”

Investors are looking beyond the hurdles as the economy improves. The Standard & Poor’s Supercomposite Retailing Index has climbed 10.6 percent so far this year, outstripping an 8.9 percent increase for the broader S&P 500.

To contact the reporter on this story: Lorraine Woellert in Washington at lwoellert@bloomberg.net

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

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