Commerce Dept: January Retail Sales Up Despite Tax Hike Worries

In Industry News, Reports, What's New by Jeff PrineLeave a Comment

Retail January 2013Washington—Worries that the hike in payroll taxes that went into effect in January might hinder retail sales appear to be unfounded.

In its monthly report on U.S. retail sales, the U.S. Commerce Department today reported that total sales rose 0.1% in January, marking the third straight month of increases albeit smaller than the 0.5% rises in November and December. The increase was also in line with economists’ average estimates, too.

The so-called core retail sales—excluding autos, building materials and stations—rose 0.2% compared to a 0.6% increase in December.

According to the National Retail Federation, (NRF), January retail sales (excluding automobiles, gas stations and restaurants) increased 0.3% seasonally adjusted from December and increased 5.4% unadjusted year-over-year.

Six of 13 major retail categories posted gains last month, led by a 1.1% increase at general merchandise stores, the biggest rise since April 2011. Demand at sporting goods merchants and non-store retailers, which include online retailers, such also advanced, up 0.9%.

Earlier this month, Retail Metrics reported that comparable store sales in more than 20 major retailers in January rose 4.5%, the biggest year-to-year gain since September 2011.

But Clothing, Accessories Sales Slump

Unfortunately, clothing and accessories retail was down 0.3% from December, but still 4.4% ahead of January 2012, the Commerce Department said. According to the NRF’s calculations clothing and accessories stores’ sales decreased 0.3% seasonally-adjusted month-to-month and increased 5.9% unadjusted year-over-year.

“Today’s retail sales figures continue to indicate a stable yet fragile economy,” said Matthew Shay, president/ceo at NRF. “Consumers are continuing to hold back on spending just as our economy is held back by political brinkmanship in D.C. The failure to address the critical challenges confronting our economy will continue to dampen consumer confidence, which will in turn mute sales and growth. The economy will continue to limp along until our politicians finally address our tax and spending challenges and put forward a pro-growth, pro-jobs agenda.”

While retail analysts expect more modest gains in retail in the coming months, they were encouraged that rising gas prices, the payroll tax increase and higher income taxes levied on affluent citizens haven’t had a worse impact.

“There is no clear signal yet of a broad-based pullback in spending on the back of the tax hikes,” said Peter Newland, analyst at Barclays Bank. While it remains to be seen how much of a hit the tax hikes will have this month and next, he added in a note to clients, “the degree of slowdown will not be so large as to prohibit a rebound in economic growth.”

“With the return of healthy housing prices, stronger employment statistics combined with historic highs on Wall Street at the end of 2012 and 2013, consumers seem a bit more confident these days,” NRF Chief Economist Jack Kleinhenz said. “Even though retail sales were relatively modest in January, consumers seem to have adjusted accordingly to rising taxes and energy prices. Far from secure, consumer confidence continues to be shaky.”





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