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Retail Sales in U.S. Probably Climbed in Sign Demand Holding Up

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Retail Sales in U.S. Probably Climbed in Sign Demand Holding Up
Consumer spending, which accounts for about 70 percent of the economy, was boosted by an improving labor market, growth in incomes and discounting by chains such as Macy’s Inc. that may help sustain demand this year. Photographer: Photo by Andrew Kelly/Getty Images

Jan. 15 (Bloomberg) -- Retail sales probably rose in December as the holiday-shopping season came to an end, showing Americans looked beyond a year-end budget battle among lawmakers, economists said before a report today.

The 0.2 percent increase would follow a 0.3 percent gain in November, according to the median forecast of 83 economists surveyed by Bloomberg. Other figures may show New York-area manufacturing stabilized, and wholesale costs were contained.

Consumer spending, which accounts for about 70 percent of the economy, was boosted by an improving labor market, growth in incomes and discounting by chains such as Macy’s Inc. that may help sustain demand this year. At the same time, households will be hard-pressed to accelerate purchases as higher payroll taxes cut into take-home pay starting this month.

“Holiday sales grew at a pretty modest pace,” said Josh Dennerlein, an economist at Bank of America Corp. in New York. “Until we see a big increase in employment growth, it’s going to be tough for consumer spending to pick up. The consumer is going to struggle a bit in the first quarter while adjusting to the new reality of the higher payrolls tax.”

Estimates of economists surveyed by Bloomberg before the Commerce Department’s report ranged from a drop of 0.3 percent to a gain of 0.8 percent.

Economists also project the Federal Reserve Bank of New York’s general economic index improved in January to zero, the dividing line between expansion and contraction at factories in New York, northern New Jersey and southern Connecticut. The gauge, also due at 8:30 a.m., retreated to minus 8.1 in December and last showed growth in July.

Producer Prices

Figures at the same time from the Labor Department may show the producer price index fell 0.1 percent in December, held down by cheaper fuel costs, after a 0.8 percent decline the prior month, according to the Bloomberg survey median.

Retailers attracted shoppers with last-minute discounts on holiday gifts. Macy’s, Gap Inc. and Nordstrom Inc. reported December same-store sales that topped analysts’ estimates.

In addition to promotions, gains in household wealth from highest stock prices and rising home values are helping underpin demand. The Standard & Poor’s 500 Index has climbed 8.7 percent since a recent low on Nov. 15.

The Commerce Department’s retail sales data, which aren’t adjusted for prices, may reflect cheaper fuel. A gallon of regular gasoline at the pump averaged $3.30 in December, the lowest level in a year and down 14 cents from a month earlier, according to AAA, the biggest U.S. motoring group.

Motor Vehicles

Demand for automobiles remains a bright spot. Cars and light trucks sold at a 15.3 million annual pace in December after 15.5 million in November, the best two months since early 2008, according to data from Ward’s Automotive Group. General Motors Co. and Ford Motor Co., the two largest automakers by U.S. sales, exceeded analysts’ estimates and forecast total deliveries will keep rising in 2013.

“Both the economy and the industry have a bit underlying momentum that we expect to continue,” Mark Reuss, president of GM North America, said on a Jan. 3 conference call with analysts. “With the fiscal cliff concern somewhat out of the way, I think we’ll see people beginning to make more decisions knowing what the tax status is.”

Retail sales excluding autos also increased 0.2 percent in December after no change the prior month, according to the Bloomberg survey median.

Payroll Taxes

The fiscal pact passed by Congress on Jan. 1 avoided sweeping tax increases and made permanent the George W. Bush-era income-tax cuts for 99 percent 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 percent from 4.2 percent. That reduces the paycheck by about $83 a month for someone who earns $50,000.

The burden of the payroll tax increase may fall more on lower-income households. Dollar General Corp., the largest dollar-store chain, said it expects consumers to spend more cautiously this year, spurring it to match rivals’ price cuts on popular items such as coffee and cereal. Family Dollar Stores Inc., the second-largest U.S. dollar-store chain, reported weaker profit margins and cut its full-year forecast.

Better job and wage prospects will cushion some of the hit. Payrolls rose by 155,000 workers last month after a 161,000 advance in November, and the unemployment rate held at 7.8 percent, matching the lowest since December 2008. Hourly earnings climbed 0.3 percent on average for a second month, the biggest back-to-back gain since the economic recovery began in mid-2009.

                         Bloomberg Survey

================================================================
                            Retail   Retail      PPI   Empire
                             Sales ex-autos             Manu.
                              MOM%     MOM%     MOM%    Index
================================================================

Date of Release              01/15    01/15    01/15    01/15
Observation Period            Dec.     Dec.     Dec.     Jan.
----------------------------------------------------------------
Median                        0.2%     0.2%    -0.1%      0.0
Average                       0.2%     0.2%    -0.1%      0.0
High Forecast                 0.8%     1.1%     0.3%      9.5
Low Forecast                 -0.3%    -0.3%    -0.8%     -8.0
Number of Participants          83       75       77       54
Previous                      0.3%     0.0%    -0.8%     -8.1
----------------------------------------------------------------
4CAST                         0.2%     0.0%    -0.2%      2.5
ABN Amro                      0.2%     ---     -0.1%      0.0
Action Economics              0.2%     0.1%    -0.1%      2.0
Ameriprise Financial          0.2%     0.3%    -0.2%      2.0
Banca Aletti                  0.3%     0.0%    -0.4%      6.0
Bank of the West              0.2%     0.1%    -0.1%     ---
Bank of Tokyo-Mitsubishi      0.4%     0.2%    -0.2%     ---
Banorte-IXE                   0.1%     ---      ---       1.0
Bantleon Bank AG              0.1%     0.3%     0.1%      1.0
Barclays                      0.3%     0.3%    -0.1%     -3.0
Bayerische Landesbank         0.2%     0.3%    -0.2%     ---
BBVA                          0.1%     0.2%     0.0%     -1.9
BMO Capital Markets           0.0%     0.1%     0.1%      0.0
BNP Paribas                   0.0%     0.1%    -0.6%     -3.0
BofA Merrill Lynch            0.2%     0.2%    -0.2%     -4.0
Briefing.com                  0.4%     0.5%     0.0%      0.0
Capital Economics             0.1%     0.2%    -0.1%     -5.0
CIBC World Markets            0.1%     0.1%     0.0%     ---
Citi                          0.1%     0.2%     0.1%     ---
ClearView Economics           0.6%     0.3%    -0.4%      0.0
Comerica                      0.3%     0.4%     0.3%     ---
Commerzbank AG                0.3%     0.5%    -0.1%      0.0
Credit Agricole CIB           0.1%     0.2%     0.1%     -3.5
Credit Suisse                 0.2%     0.2%     0.1%     ---
Daiwa Securities America     -0.3%    -0.3%    -0.1%     ---
Danske Bank A/S               0.8%     ---     -0.1%      2.9
DekaBank                      0.3%     0.2%     ---      -3.0
Desjardins Group              0.2%     0.3%     0.0%      4.0
Deutsche Bank Securities      0.2%     0.4%    -0.1%      8.0
Deutsche Postbank AG          0.2%     0.3%     0.1%     ---
Exane                         0.7%     0.6%    -0.3%     -2.0
First Trust Advisors          0.5%     0.5%     0.0%     -2.5
FTN Financial                 0.3%     0.3%     0.0%     ---
Goldman, Sachs & Co.          0.5%     0.3%     0.0%     ---
Hammer Partners               0.2%     0.3%     ---       1.0
Helaba                        0.1%     0.2%    -0.1%      0.0
High Frequency Economics      0.0%     0.1%     0.1%      0.0
HSBC Markets                  0.2%     0.2%    -0.1%      1.0
Hugh Johnson Advisors         0.1%     0.2%     0.1%      0.0
IDEAglobal                    0.4%     0.5%     0.1%     -2.0
IHS Global Insight            0.1%     0.2%    -0.1%     -5.0
Informa Global Markets        0.0%     0.2%    -0.2%     -3.0
ING Financial Markets         0.1%     0.1%     0.1%     -2.0
Intesa Sanpaolo               0.4%     0.3%    -0.2%      3.0
J.P. Morgan Chase             0.2%     0.3%    -0.4%     -2.0
Jefferies & Co.               0.4%     0.5%     0.0%     -2.0
John Hancock Financial        0.6%     0.4%     0.1%     ---
Landesbank Berlin             0.3%     0.3%    -0.5%     ---
Landesbank BW                 ---      ---      ---       4.0
Lloyds Bank                   0.3%     0.1%     0.0%      2.0
Maria Fiorini Ramirez         0.1%     0.2%    -0.1%     ---
Market Securities             ---      ---      0.0%     ---
MET Capital Advisors          0.1%     ---     -0.1%     ---
Mizuho Securities             0.0%     0.1%    -0.3%      0.1
Moody’s Analytics             0.1%     0.1%     0.1%     -8.0
Morgan Stanley & Co.          0.6%     0.4%     0.3%     ---
National Bank Financial       0.2%     0.0%    -0.1%     ---
Natixis                       0.1%     0.2%     0.0%     ---
Nomura Securities             0.2%     0.3%    -0.2%     -5.0
OSK Group/DMG                 0.2%     0.3%     ---      ---
Oxford Economics              0.3%     0.2%    -0.1%     ---
Pierpont Securities          -0.3%     0.0%    -0.4%     ---
PineBridge Investments        0.4%     ---      0.2%     -2.0
PNC Bank                      0.1%     0.3%    -0.8%     ---
Prestige Economics            0.3%     0.0%     ---      ---
Raiffeisenbank International -0.2%    -0.3%     0.2%     ---
Raymond James                 0.6%     0.6%     0.1%      3.2
RBC Capital Markets           0.3%     0.1%     0.3%      4.0
RBS Securities               -0.1%    -0.1%    -0.4%     ---
Regions Financial             0.3%     0.4%     0.2%     ---
Renaissance Macro Research    0.2%     0.2%     0.0%      0.0
Santander                     0.3%     0.2%     ---      ---
Scotiabank                    0.0%     0.2%    -0.2%      0.0
SMBC Nikko Securities         0.3%     0.6%    -0.3%     -3.0
Societe Generale              0.8%     1.1%    -0.2%      9.5
Standard Chartered            0.2%     0.5%    -0.1%      0.0
Stone & McCarthy              0.2%     0.1%    -0.1%     -1.5
TD Securities                 0.1%     0.2%    -0.3%      5.0
UBS                          -0.1%     0.3%     0.2%      0.0
UniCredit Research            0.0%     ---      ---      ---
Union Investment              0.3%     ---      0.2%     ---
University of Maryland        0.2%     0.2%    -0.2%      2.0
Wells Fargo & Co.             0.3%     0.3%    -0.1%     ---
Westpac Banking Co.           0.1%     ---      0.0%      2.0
Wrightson ICAP                0.4%     0.6%    -0.1%     -4.0
================================================================

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

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

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