Retail Sales in U.S. Probably Advanced for a Fourth Month

Sales at U.S. retailers probably rose in February for the fourth consecutive month as an improved job market and stronger household finances helped consumers adjust to a higher payroll tax, economists said before a report this week.

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 67 economists before March 13 figures from the Commerce Department. Another report this week may show factory production rebounded.

More jobs and rising wages are shoring up sentiment and underpinning demand at chains including Costco Wholesale Corp. and Gap Inc.’s Old Navy even as a tax increase trimmed paychecks beginning in January. The threat of across-the-board cuts in government spending -- known as sequestration -- also failed to deter households as rising home and stock prices boosted wealth.

“Consumers aren’t packing it in, that’s for sure,” said Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “The sequester, at least so far, has had no discernible impact on confidence.”

Improved demand for motor vehicles probably contributed to the increase in sales last month. Cars and light trucks moved off dealer lots 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. 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 given sales a boost as gasoline prices rose. The Commerce Department’s figures aren’t adjusted for inflation. The price of a gallon of regular gasoline at the pump averaged $3.67 a gallon in February, up from $3.32 the prior month.

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. Seven of 12 chains reported sales that beat analysts’ estimates, led by apparel stores including Gap and Limited Brands Inc.

Employment Gains

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 surge in hiring defied concern that budget battles in Washington could 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.

Wrangling over the deal forced the Internal Revenue Service to delay accepting and processing 2012 tax returns, which is slowing refunds. Through March 6, taxpayers had received $152.2 billion in IRS refunds, compared with $168.2 billion at the same point last year, according to Treasury Department figures.

‘Improving Gradually’

“A lot of the retailers tell us February sales were soft as consumers finally began to pay attention to their paychecks and delayed tax refunds,” said Jacob Oubina, a senior economist at RBC Capital Markets LLC in New York. “There was a confluence of headwinds. We’re improving gradually.”

Some discount and department store retailers including Wal-Mart Stores Inc. 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 because of a slowdown last month. 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 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.”

Nonetheless, investors are looking beyond the hurdles as the economy improves. The Standard & Poor’s Supercomposite Retailing Index has climbed 10.8 percent so far this year, outstripping the 8.8 percent increase for the broader S&P 500.

Consumer Prices

The cost of living rose in February for the first time in four months, economists project a March 15 report from the Labor Department will show. The consumer-price index climbed 0.5 percent last month, reflecting the increase in fuel prices, after being little changed in January and December and dropping in November, according to the Bloomberg survey median.

Manufacturers have benefited from improved consumer demand as well as a pickup in exports and business investment.

Industrial production grew 0.4 percent in February after a 0.1 decline the previous month, according to the Bloomberg survey’s median forecast before Federal Reserve data on March 15.

Other reports this week might show manufacturing in the New York area expanded in March, and an index of consumer sentiment probably climbed to a four-month high, according to economists surveyed.

                        Bloomberg Survey
                        Release    Period    Prior     Median
Indicator                 Date               Value    Forecast
Retail Sales MOM%         3/13      Feb.      0.1%      0.5%
Retail ex-autos MOM%      3/13      Feb.      0.2%      0.5%
Retail exauto/gas MOM%    3/13      Feb.      0.2%      0.2%
Business Inv. MOM%        3/13      Jan.      0.1%      0.4%
Initial Claims ,000’s     3/14     9-Mar      340       350
PPI  MOM%                 3/14      Feb.      0.2%      0.7%
Core PPI MOM%             3/14      Feb.      0.2%      0.2%
CPI  MOM%                 3/15      Feb.      0.0%      0.5%
Core CPI MOM%             3/15      Feb.      0.3%      0.2%
CPI  YOY%                 3/15      Feb.      1.6%      1.8%
Core CPI YOY%             3/15      Feb.      1.9%      2.0%
Ind. Prod. MOM%           3/15      Feb.     -0.1%      0.4%
Manu. Prod. MOM%          3/15      Feb.     -0.4%      0.5%
U of Mich Conf. Index     3/15    March P     77.6      77.8
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