December US retail sales rise
Housing market rebound helps sustain consumer spending
NEW YORK: Retail sales probably rose in December as Americans wrapped up their holiday shopping and auto dealers closed out the best two months since 2008, economists said before a report this week.
The 0.2% increase would follow a 0.3% gain in November, according to the median forecast of 72 economists surveyed by Bloomberg before the Commerce Department’s figures on Jan 15. Other reports are projected to show homebuilding picked up, manufacturing expanded and the cost of living remained contained.
The housing-market rebound, higher stock prices and an improving job market are helping sustain consumer spending, which accounts for about 70% of the economy. At the same time, households may be hard-pressed to accelerate purchases as higher payroll taxes shrink take-home pay.
“Consumers have proven to be fairly resilient, though a little cautious,” said Mike Englund, chief economist at Action Economics LLC in Boulder, Colorado. “People will be stunned at how small their paychecks are when they get them this month.” Still, “the economy will muddle through.”
The fiscal pact passed by Congress on Jan 1 made permanent the George W. Bush-era income-tax cuts for 99% of Americans. The agreement also let the payroll tax used to pay for Social Security benefits return to the 2010 level of 6.2%, from 4.2%. That reduces the paycheck by $41.67 for someone who earns $50,000 and gets paid twice a month.
Better job and wage prospects will cushion some of the hit. Payrolls rose by 155,000 workers last month after a 161,000 advance in November, and the unemployment rate held at 7.8%, matching the lowest since December 2008. Hourly earnings climbed 0.3% on average for a second month, the biggest back-toback increase since the economic recovery began in mid-2009.
Demand for automobiles remains a bright spot. Cars and light trucks sold at a 15.3 million annual pace in December after a 15.5 million rate in November, the best two months since early 2008, according to data from Ward’s Automotive Group. General Motors Co and Ford Motor Co, the two largest automakers by US sales, exceeded analysts’ estimates and forecast total deliveries will keep rising in 2013.
“Both the economy and the industry have a bit underlying momentum that we expect to continue,” Mark Reuss, president of GM North America, said on a conference call with analysts on Jan 3. “With the fiscal cliff concern somewhat out of the way, I think we’ll see people beginning to make more decisions knowing what the tax status is.”
Retail sales excluding autos also increased 0.2% in December after no change, according to the Bloomberg survey median.
Retailers attracted shoppers with lastminute discounts on holiday gifts. Gap Inc, Macy’s Inc and Nordstrom Inc reported December same-store sales that topped analysts’ estimates.
The burden of the payroll tax increase may fall more on lower-income households. Dollar General Corp, the largest dollar-store chain, said it expected consumers to spend more cautiously this year, spurring it to match rivals’ price cuts on popular items such as coffee and cereal. Family Dollar Stores Inc, the second largest US dollar-store chain, reported weaker profit margins and cut its full-year forecast.
The Commerce Department’s retail sales data, which aren’t adjusted for prices, may reflect cheaper fuel.
A gallon of regular gasoline at the pump averaged US$3.30 in December, the lowest level in a year and down 14 cents from a month earlier, according to AAA, the biggest US motoring group. — Bloomberg