Bloomberg News

December Gain in Retail Sales Gives U.S. a Lift: Economy

January 14, 2014

Shopping in N.Y.

Holiday-season deals probably helped retailers overcome the coldest December in four years. At the same time, improving confidence owing to falling joblessness and further healing in the housing market is likely to support household spending. Photographer: Jin Lee/Bloomberg

Retail sales (RSTAXAGM) rose in December as frigid temperatures prodded Americans to buy discounted winter clothing and shop online for the holidays, capping what may have been the strongest quarter for consumer spending in three years.

Purchases (RSTAMOM) increased 0.2 percent after a 0.4 percent advance in November, Commerce Department figures showed today in Washington. Excluding a drop in auto demand that vehicle makers also partly attributed to the bad weather, sales jumped by the most in almost a year.

As consumers buy more, their confidence buoyed by lower unemployment and higher home values, they are turning to retailers such as Amazon.com Inc. (AMZN:US) to shop from home and avoid inclement conditions. The sales figures helped economists firm up estimates for fourth-quarter household spending, with some projections approaching gains of 4 percent, which would make it the best since the last three months of 2010.

Related: U.S. Stocks Rise on Retail Sales Data

“It’s encouraging as we exit the year, particularly with some of the headwinds that we had with a little bit more challenging weather and the shorter holiday-spending period,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit and the second-best forecaster of retail sales over the past two years, according to data compiled by Bloomberg. “The consumer is still a driver” of the economy.

Optimism last month extended to small businesses, another report showed. The National Federation of Independent Business sentiment index climbed to a three-month high of 93.9 from a November reading of 92.5 as a greater share of small companies said they foresaw an increase in sales.

Funding Measure

Less partisan bickering on Capitol Hill may provide a further boost to companies’ outlooks. House and Senate lawmakers agreed to a bipartisan compromise to fund the U.S. government through Sept. 30. The $1.01 trillion measure, announced last night and unveiled days before financing for federal agencies is scheduled to lapse, would fund those agencies as well as the health-care law and separate war financing to bring the total to $1.1 trillion.

Stocks rose, giving the Standard & Poor’s 500 Index its biggest gain of the year, after the retail sales report. The S&P 500 added 1.1 percent to 1,838.88 at the close in New York. The S&P Supercomposite Retailing Index rose 0.7 percent.

Another report today showed the costs of goods bought from abroad were unchanged in December, indicating little inflation pressure from overseas. The reading for the import-price index followed a 0.9 percent drop in November, according to figures from the Labor Department. Excluding fuel, prices fell 0.1 percent, the first decline since August.

Less Inflation

Inflationary pressures also abated in the U.K., where consumer prices rose 2 percent in December from a year earlier, cooling to match the Bank of England’s target for the first time in more than four years, data from the Office for National Statistics showed today in London.

The U.S. retail sales report showed seven of 13 major merchant categories realized gains last month. The increases were paced by a 2 percent jump at grocery and beverage stores that was the biggest since October 2006.

The gains weren’t distributed equally. Department stores and clothing chains piled on discounts to attract shoppers who are increasingly shopping online and have become trained to seek out deals. Home-goods merchant Pier One Imports Inc. (PIR:US), discounter Family Dollar Stores Inc. and luxury lingerie seller L Brands Inc. were among retailers last week that cut earnings forecasts for their holiday quarters, with some saying the promotional environment took a toll on profit margins.

Tracking Receipts

ShopperTrak, a researcher that compiles retail data from receipt information and devices in stores, said last week that holiday sales rose 2.7 percent among the mall-based sellers of general merchandise, apparel, furniture and electronics it tracks. That was smallest increase since 2009. Customer traffic in November and December declined 15 percent from the same period a year earlier, the Chicago-based firm said.

The median forecast of 86 economists surveyed by Bloomberg called for a 0.1 percent gain in sales. Estimates ranged from a decline of 0.5 percent to a 0.6 percent increase. November’s reading was revised down from an initially reported 0.7 percent advance.

For all of 2013, retail sales rose 4.2 percent from the prior year, following a 5.4 percent gain in 2012.

Auto Dealers

Motor vehicle dealers reported a 1.8 percent drop in purchases last month, the most since October 2012. Excluding the decline, retail sales climbed 0.7 percent, the biggest gain since February.

Auto purchases fell to a 15.3 million annualized rate from a 16.3 million pace in November, according to data from Ward’s Automotive Group. Last month was the coldest December since 2009 and snowfall was 21 percent above normal, according to weather-data provider Planalytics Inc.

Bad weather on the East Coast and Midwest last month slowed sales gains at General Motors Co. (GM:US) for the year. All of the biggest automakers in the U.S. missed analysts’ estimates, with GM’s deliveries dropping 6.3 percent in December from a year earlier.

“Weather certainly had an impact as the storms blew through the Midwest, which is typically a stronghold for us, and then off into the Northeast,” Kurt McNeil, GM’s vice president of U.S. sales, said on a Jan. 3 sales call. “That definitely had an impact, no question.”

2013 Sales

Still, automakers completed their best sales year since 2007 and are upbeat about the year ahead. Dearborn, Michigan-based Ford Motor Co. (F:US), the second-largest U.S. automaker, plans to add 5,000 jobs in the U.S. as it introduces 16 new vehicles in North America this year.

Sales excluding merchants such as food services, car dealers, hardware stores and service stations -- which are the figures used to calculate gross domestic product -- increased 0.7 percent in December, the biggest jump since July 2012, after posting a revised 0.2 percent gain the prior month that was smaller than previously estimated.

The figures put household spending, which accounts for almost 70 percent of the economy, on track to rise at a 3.7 percent annualized rate in the fourth quarter, according to economists at Morgan Stanley in New York. Their counterparts at Barclays Plc in New York projected a 3.8 percent gain. Either outcome would make for the strongest quarter since a 4.3 percent advance in the last three months of 2010.

Online Sales

One of the bright spots last month was Internet sales. Purchases increased 1.4 percent at non-store retailers in December after a 1.6 percent gain the prior month, today’s report showed. That was the best two-month advance since October-November 2012.

Seattle-based Amazon, the largest online retailer, offered customers $20 gift cards and refunds on shipping charges after a surge in orders caused United Parcel Service Inc. to miss delivery of some packages by Christmas.

“That was a trend this holiday season that was very well-established,” Price said. “People are finally not just willing to order via their computer but also from their tablets and most importantly their mobile phones, which is clearly something that’s different.”

The bad weather probably also restrained hiring last month, with payrolls rising by 74,000 workers, the smallest gain in almost three years, figures from the Labor Department showed last week. The advance followed a 241,000 jump in November. The unemployment rate declined to 6.7 percent, the lowest since October 2008, as more people left the labor force.

At the same time, consumer confidence in the U.S. rose to a five-month high in December as Americans were feeling more upbeat about the economy. The Thomson Reuters/University of Michigan consumer sentiment index climbed to 82.5 from 75.1 in November.

To contact the reporter on this story: Michelle Jamrisko in Washington at mjamrisko@bloomberg.net

To contact the editor responsible for this story: Carlos Torres at ctorres2@bloomberg.net


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Companies Mentioned

  • AMZN
    (Amazon.com Inc)
    • $326.41 USD
    • 1.91
    • 0.59%
  • PIR
    (Pier 1 Imports Inc)
    • $12.19 USD
    • -0.02
    • -0.16%
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