Retail Sales in U.S. Increase More Than Anticipated

Sales at U.S. retailers climbed in January for the third time in four months, signaling the consumer spending recovery that began in late 2009 continues into the new year.

The 0.5 percent increase was larger than forecast and followed a 0.1 percent drop the prior month that was smaller than previously estimated, Commerce Department figures showed today in Washington. Purchases excluding autos rose 0.6 percent.

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A drop in unemployment and a longer workweek last month signal the economy is poised to generate jobs, which will lead to gains in income that may further lift demand. Macy’s Inc. and Gap Inc. are among retailers driving profits up by keeping stockpiles lean after the biggest household spending slump in three decades.

“Consumers showed continued improvement,” said John Herrmann, chief economist at Herrmann Forecasting in Summit, New Jersey. “Consumers are still relatively cautious, spending what they’re making and not taking on debt.”

Stock-index futures held earlier losses after the report, depressed by China’s efforts to cool its economy. The contract on the Standard & Poor’s 500 Index fell 0.5 percent to 1,070.8 at 8:48 a.m. in New York.

Retail sales were projected to rise 0.3 percent after an originally reported 0.3 percent drop in December, according to the median estimate of 82 economists in a separate Bloomberg survey. Forecasts ranged from a decline of 1 percent to a 0.7 percent gain.

Purchases excluding autos were projected to increase 0.5 percent, according to the survey median.

Broad-based Gains

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Nine of 13 major categories showed gains in sales last month, led by general merchandise stores, grocery stores and non-store retailers.

Auto sales were unchanged after rising 0.1 percent in December. Industry data earlier this month, which are the figures used by the government to calculate gross domestic product, showed purchases fell for the first time in four months.

Sales at non-store retailers which include Internet retailers, rose 1.6 percent after a 2.2 percent gain in December. Inc. reported Jan. 28 that its fourth-quarter profit and sales beat analysts’ estimates as shoppers took advantage of holiday discounts and free shipping.

Influence on Growth

Excluding autos, gasoline and building materials — the retail group the government uses to calculate GDP figures for consumer spending — sales climbed 0.8 percent after a 0.3 percent decrease. The government uses data from other sources to calculate the contribution from the three categories excluded.

Sales at 31 chains rose 3 percent last month, the International Council of Shopping Centers said Feb. 4, beating its forecast of a 1 percent gain. Lower inventories helped stores reduce markdowns, which boosted sales volume and profit margins, said Mike Niemira, the ICSC’s chief economist.

“The retail recovery continues,” Niemira said in a telephone interview.

Macy’s, the second-largest U.S. department-store company, last week said sales at stores open at least a year gained 3.4 percent in January, helped by online purchasing. The Cincinnati- based retailer said fourth-quarter profit exceeded its forecast.

Less Unemployment

The jobless rate unexpectedly fell to 9.7 percent last month from 10 percent in December, figures from the Labor Department showed last week. A 20,000 drop in payrolls served as a reminder that the labor market has yet to fully recover.

The U.S. economy, the world’s largest, expanded 5.7 percent in the last three months of 2009, the most in six years, the Commerce Department said last month.

Consumer spending grew at an average 2.4 percent pace in the last six months of the year. For all of 2009, household purchases dropped 0.6 percent, the worst performance since 1974.

Consumer purchases, which account for 70 percent of the economy, will grow at a 2.3 percent rate in the second half of this year and expand 2.5 percent in 2011, according to the median estimates of economists surveyed this month. By comparison, spending rose 3.3 percent on average over the two decades through 2007.

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