U.S. Economy: Retail Sales Climb Less Than Forecast

Sales at retailers rose less than forecast in January, showing it will be difficult for American consumers to sustain last quarter’s pickup in spending without bigger gains in employment.

Purchases increased 0.3 percent, the smallest gain since a drop in June, according to Commerce Department figures today in Washington. Other reports showed manufacturing in the New York area accelerated and confidence among home builders stagnated.

The sales data also indicated winter snowstorms may have played a role in the slowdown as Americans stayed away from restaurants and home-improvement stores. While Gap Inc. and Macy’s Inc. were among retailers topping analysts’ estimates as promotions lured post-holiday shoppers, rising food and gasoline prices may have caused households to cut back on non-essentials.

“There is some momentum in consumer spending, but it’s not particularly robust,” said Kevin Logan, chief U.S. economist at HSBC Securities USA Inc. in New York, who correctly forecast the gain. “Things are recovering, but they’re not really healthy,” he said, and in addition, “the severe weather last month curtailed all kinds of outdoor activity.”

The Standard & Poor’s 500 Index retreated from a 32-month high after the reports, falling 0.3 percent to 1,328.01 at the 4 p.m. close in New York. The S&P Supercomposite Retailing Index decreased 0.1 percent.

Survey Median

Sales were projected to increase 0.5 percent based on the median forecast of 79 economists in the Bloomberg News survey. Estimates ranged from a gain of 1.1 percent to a drop of 0.5 percent. The December increase in sales was revised down to 0.5 percent from the 0.6 percent previously estimated.

Federal Reserve policy makers are among those saying bigger gains in employment are needed to ensure American consumers sustain spending. While unemployment fell to 9 percent in January, from 9.4 percent in December, it has been 9 percent or higher since May 2009, the longest period of elevated joblessness since monthly records began in 1948.

Fed Chairman Ben S. Bernanke and fellow policy makers are awaiting further proof of a durable pickup in the labor market that will lift growth. That’s one reason why they are pressing ahead with a second round of monetary stimulus worth $600 billion.

Manufacturing in the region covered by the Fed Bank of New York expanded this month at the fastest pace since June, another report showed. The bank’s general economic index rose to 15.4 from 11.9 in January. Readings greater than zero signal growth in the so-called Empire State Index, which covers New York, northern New Jersey, and southern Connecticut.

Builder Pessimism

The National Association of Home Builders/Wells Fargo said its sentiment index registered a reading of 16 in February for the fourth consecutive month, in line with the median forecast of economists surveyed by Bloomberg. Readings below 50 mean more respondents said conditions were poor.

Also today, figures from the Labor Department showed import prices climbed 1.5 percent in January, propelled by higher costs for commodities like food and fuel.

Eight of 13 major retail categories showed an increase in demand last month, led by auto dealers, grocery stores and service stations, according to the Commerce Department’s figures. Filling station sales advanced 1.4 percent.

The data, which aren’t adjusted for inflation, may have been boosted by rising gasoline prices. Regular fuel in January reached an average $3.10 a gallon, or 11 cents more than December, according to AAA, the nation’s biggest motoring organization.

Auto Sales

Sales climbed 0.5 percent at automobile dealers, consistent with industry figures that showed car purchases climbed last month to a 12.54 million unit annual pace that was the best since the government’s cash-for-clunkers program in August 2009.

Demand dropped 2.9 percent at building-material stores, the most since May, and restaurant receipts dropped 0.7 percent, the biggest decrease since March 2009. In contrast, the 1.3 percent gain at grocery stores was the biggest since August.

Whole Foods Market Inc., the largest U.S. natural-goods grocer, last week raised its annual profit and revenue forecasts after the Austin, Texas-based company’s first-quarter earnings beat analysts’ estimates.

“Our results underscored signs that consumer confidence continues to improve,” Co-Chief Executive Officer Walter Robb said on a Feb. 9 conference call.

Winter storms spread from the Midwest and the South to New England, covering 71 percent of the country with snow on Jan. 12, according to the National Climatic Data Center.

Cutting Forecasts

Excluding autos, gasoline and building materials, which are the figures used to calculate gross domestic product, sales increased 0.4 percent after a 0.1 percent drop the prior month that was previously reported as a gain.

January figures combined with the revisions prompted some economists to cut forecasts for consumer spending this quarter. David Greenlaw, chief financial economist at Morgan Stanley, said purchases will rise 2.7 percent this quarter, down from his prior estimate of 3.3 percent.

“Consumer can’t quite keep up with exuberant expectations,” Mike Feroli, chief U.S. economist at JPMorgan Securities LLC in New York, said in a note to clients. Feroli said it will “be difficult” to achieve his forecast of 3.5 percent, and said spending is tracking closer to 2.5 percent to 3.0 percent.

Household purchases climbed at a 4.4 percent pace in the last three months of 2010, the biggest increase in four years.