U.S. Retail Sales in January rose more than expected

U.S. Retail Sales in January rose more than expected

Retail sales rose at a healthy pace in January, a sign that firming wage gains and solid consumer sentiment could be set to boost overall economic growth in 2017

Sales at U.S. retail stores and restaurants increased 0.4% from the prior month to a seasonally adjusted $472.14 billion in January, the Commerce Department said Wednesday.

Spending was steady or up in most categories outside a pullback in purchases of cars and trucks.

“The upshot is that the improvement in consumer confidence since President Donald Trump’s election victory now appears to be feeding through into stronger gains in actual spending,” said Paul Ashworth, chief U.S. economist at Capital Economics, in a note to clients. Excluding motor vehicles and automotive parts, sales rose 0.8 % from December. Excluding both autos and gasoline, sales were up 0.7 % last month, which was the strongest reading since last April.

Economists surveyed by The Wall Street Journal had expected a more modest 0.1 % increase in overall retail sales and a 0.5 % gain excluding autos in January. Also, December’s sales growth was revised higher in Wednesday’s report, to a 1.0% gain from an earlier estimate of a 0.6 % rise.

Total retail sales in January were up 5.6% from a year earlier, more than outpacing consumer-price increases.

The report of February 15, 2017, featured one notable weak spot: Auto sales in January were down 1.4 % from the prior month. U.S. car and light-truck sales hit a record high in 2016, but auto makers reported the pace of unit sales slowed in January despite steep discounting. Still, auto sales were up 6.8 % in January from a year earlier.

But spending at gasoline stations rose 2.3 % in January from the prior month and jumped 14.2 % on the year. Prices at the pump moved higher over the past year following a sharp decline in oil prices that began in mid-2014.

And sales at restaurants and bars rose 1.4 % in January from the prior month, the strongest gain in 11 months, and were up 5.6 % on the year.

While total restaurant spending rose last year, many chains reported diminished foot traffic and sales—a trend they hope will reverse in 2017. Buffalo Wild Wings Inc.’s same-store sales continued to decline in late 2016, but so in the first quarter, “we are seeing a modestly positive traffic number,” Chief Executive Sally Smith told analysts last week.

Americans continue to shift their spending from traditional brick-and-mortar retailers to e-commerce platforms. Department-store sales in January fell 3.2 % from a year earlier while sales at nonstore retailers, a category that includes online shopping, climbed 12.0 % from January 2016.

Consumers are the main engine of the U.S. economy, with household outlays on goods and services accounting for more than two-thirds of gross domestic product.

With support from firming wage growth and low unemployment, spending rose at a 2.5 % seasonally and inflation-adjusted annual rate in the fourth quarter and contributed 1.7 percentage points to the overall GDP growth rate of 1.9 %, according to Commerce Department data.

“Consumer spending has continued to rise at a healthy pace, supported by steady income gains, increases in the value of households’ financial assets and homes, favourable levels of consumer sentiment and low interest rates,” Federal Reserve Chairwoman Janet Yellen told lawmakers this week.

Surveys of consumer confidence jumped following the Nov. 8 presidential election, raising hopes for a potential pickup in overall economic growth. But some forecasters remain cautious as they await details on the tax, trade and other policies that will be pursued by President Donald Trump and congressional Republicans.

One potential snag for consumer spending in the current month: Delayed tax refunds for millions of U.S. households.

The Internal Revenue Service began accepting 2016 tax returns in January, but a new law prevents the IRS from paying out refunds for tax returns claiming the earned-income tax credit or child tax credit until mid-February. The tax agency warned that, due to processing time and the Presidents Day holiday, early filers might not get access to their money until February 27, 2017.

The measure is intended to prevent fraud by allowing the IRS to double-check income data. But the delay could pinch low-income families and push back some planned consumer spending from February to March. The Commerce Department will release February retail-sales data on March 15.

O’Reilly Automotive Inc. reported its same-store sales were up 4.8 % in the fourth quarter compared with a year earlier, but predicted sales growth in the 2 % to 4 % range for the first quarter of 2017. The auto-parts chain blamed the expected slowdown, in part, on the delay for tax refunds.

Spending by early tax filers, who are “generally the most economically incentivized customers to get their money as quick as they can,” would have shown up “towards the end of January, first of February, and we have not seen that yet because of the delay,” Chief Financial Officer Tom McFall told analysts last week. “I think most of that trues up before the end of the quarter, but I don’t really know for sure.”



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