Washington—Despite concerns that the increased payroll tax and higher income taxes on wealthy Americans would hinder 2013 sales, the U.S. Commerce Department reported today that total U.S. retail sales rose in February posted their biggest gain since September 2012.
According to the Commerce Department, total retail sales were up 1.1% to $421.4 billion. That was well ahead of economists’ average estimate for a 0.5% gain and represented a 4.6% increase over February 2012. Total sales for December 2012 to February 2013 were up 4.5% from the same period a year ago.
The so-called core retail sales, which exclude cars, gasoline and building materials and corresponds to 70% of the U.S. economy, rose 0.4% after a 0.3% gain in January. This increase comes as a 2% payroll tax cut was eliminated this year and taxes went up for the wealthiest Americans on Jan. 1. Yet employment
Gains accelerated in February and manufacturing put on its best performance in 1 to 1/2 years.
“The combination of higher gasoline prices and higher payroll taxes limited household purchasing power at the start of the first quarter,” economists with UBS Investment Research wrote this week. “That said, a strengthening labor market, rising tax refunds and a more confident consumer should provide important support to the consumer later in the quarter.”
According to the National Retail Federation (NRF), February retail sales (excluding automobiles, gas stations and restaurants) increased 0.7% seasonally adjusted from January and increased 0.5% unadjusted year-over-year.
Clothing, Accessories Sales Rise 0.2%
While spending surged at gasoline stations by 5% and also rose at grocery stores and auto dealers, but dropped 1% at department stores, 0.7% at restaurants and 1.6% at furniture stores, perhaps indicating consumers may have cut their spending on nonessentials.
Eight of 13 major categories showed increases last month, led by a 5% jump in receipts at gas stations reflecting higher fuel costs. Sales also climbed at building materials outlets, auto dealers and general merchandise stores (up 0.5%) Sales at nonstore retailers, which include online, were up 15.7% over February a year ago. And sales of clothing and accessories proved a bright spot, rising 0.2% in February, and 3.1% higher than February 2012.
“Consumers, once again, exceeded economists’ expectations and estimates in February,” NRF Chief Economist Jack Kleinhenz said. “It may be too early to measure the impact of the payroll tax hike and higher gasoline prices on consumer spending. However, this portends a good, but not great, first quarter for retailers as consumers continue to breathe life into the economy.”’’
Terry Sheehan, economic analyst at Stone & McCarthy Research, told Bloomberg News that the report “shows some steady underlying strength. These numbers are cause for cautious optimism.”
“Retail continues to show its importance to the economy,” Matthew Shay, president/ceo of NRF, said. “That said, our consumer research consistently shows a cautious shopper that is making tough spending decisions based upon economic uncertainties, lower paychecks and higher prices for things such as gas. This is particularly true among those making $50,000 or less a year. While retail sales numbers indicate good momentum for the economy, consumers with less earning power may continue to face ongoing pressure and retail sales will encounter further challenges as sequestration takes full effect in March.”