Retail Sales Show a Surprise. Overall Picture is a Mixed Bag

Surprise retail sales up 1%

Feb. 12 (Bloomberg) — Sales at U.S. retailers unexpectedly halted a record six-month slide in January, reflecting higher gasoline prices and more spending on items such as clothing and food.

The 1 percent increase followed a revised 3 percent drop the prior month, the Commerce Department said today in Washington. Purchases excluding automobiles gained 0.9 percent.

Consumer spending, about 70 percent of the economy, is likely to resume shrinking as the year progresses, according to a separate monthly Bloomberg News survey, capping the longest slide on record. Lawmakers are aiming to shore up the economy with a $789 billion stimulus package that’s designed to create 3.5 million new jobs.

“Gasoline prices firmed up over the months and so did sales at gasoline stations,” Ellen Zentner, a senior U.S. economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said before the report. Overall, “consumer spending is on the skids.”

Stock-index futures pared their decline and Treasuries dropped. Contracts on the Standard & Poor’s 500 Stock Index were down 0.4 percent at 8:40 a.m. in New York after dropping as much as 1.3 percent earlier. Yields on benchmark 10-year notes were at 2.78 percent, compared with 2.75 percent late yesterday.

Economists’ Forecasts

Retail sales were projected to fall 0.8 percent after an initially reported 2.7 percent drop the prior month, according to the median estimate of 72 economists in a Bloomberg News survey. Forecasts ranged from a decline of 2.2 percent to a 0.7 percent gain.

Sales excluding automobiles were forecast to decrease 0.4 percent from the prior month, according to the survey median.

The figures aren’t adjusted for inflation, so price increases can influence the data. The average cost of a gallon of regular gasoline last month rose by 10 cents to $1.78 a gallon, according to AAA.

Receipts at filling stations increased 2.6 percent in January, the first gain in six months, following a 16 percent decline in December.

Today’s report showed sales at automobile dealerships and parts stores rose 1.6 percent, the first gain since August, after decreasing 2 percent.

Outlook for Autos

Still, demand for automobiles has softened as banks tighten lending standards and consumers hunker down. Sales plunged 55 percent at Chrysler LLC and sank 49 percent at General Motors Corp. last month as car loans became scarce after credit seized up late last year.

If consumers “can’t get credit, you can’t sell vehicles,” Mark LaNeve, GM’s sales chief, said in an interview Feb. 3. “This is what is choking us to death.”

Excluding autos, gasoline and building materials, the retail group the government uses to calculate gross domestic product figures for consumer spending, sales rose 1.2 percent in January, following a 1.7 percent decrease in December. The government uses data from other sources to calculate the contribution from the three categories excluded.

Sales also rose for electronics, appliances, clothing and food and beverages. Sales declined at building materials stores, furniture outlets and department stores.

Purchases at non-store retailers, which include online and catalog sales, rose 2.7 percent.

Annual Drop

Retailers are nonetheless bracing for the first annual drop in sales in at least 14 years, according to the National Retail Federation. January same-store sales dropped 1.6 percent from a year ago, the International Council of Shopping Centers reported last week.

Consumer spending is set to contract again this quarter after falling in the second half of 2008, economists predict. Purchases haven’t declined for three consecutive three-month periods since records began in 1947.

The world’s largest economy may contract at a 5.5 percent annual pace this quarter after shrinking at a 3.8 percent rate in the last three months of 2008, according to a forecast by economists at Morgan Stanley in New York. Last quarter’s drop was the biggest since 1982.

The unemployment rate jumped to 7.6 percent in January, the highest level since 1992, the Labor Department said last week. Payrolls plunged by 598,000, bringing the total number of jobs lost over the last 13 months to 3.6 million.

Retailers are slashing staff as they forecast declining sales. Macy’s Inc., the second-largest U.S. department-store company, is eliminating 7,000 jobs after discounts of 60 percent failed to stem revenue declines during the worst holiday season in four decades.

“Reducing our workforce is an unfortunate outcome of the current economic environment,” Chief Executive Officer Terry Lundgren said in a statement last week.