Retail Sales in U.S. Probably Rose by Most in Four Months on Automobiles

Retail Sales in U.S. Probably Rose by Most in Four Months on Automobiles

Sales at U.S. retailers probably increased in January by the most in four months, spurred by the biggest gain in auto purchases since 2009, economists said before a report this week.

The projected 0.8 percent gain in retail receipts would follow a 0.1 percent advance in December, according to the median forecast of 65 economists surveyed by Bloomberg News before Commerce Department figures on Feb. 14. Industrial production jumped and the cost of living increased in January, other data may show.

The drop in unemployment to a three-year low is evidence of an improving job market that’s essential to sustaining purchases, which account for about 70 percent of the world’s largest economy. Gains in consumer and business spending and the need to replenish inventories are bolstering production at a time when Europe’s slowdown poses a risk for factories.

“As we’ve seen further gains in labor market activity, that should lead to further gains in spending,” said Millan Mulraine, a senior U.S. strategist at TD Securities in New York. “It’s hard to argue against the case that the U.S. economy is gaining momentum.”

Employers added 1 million workers to payrolls over the past six months, according to Labor Department data. During that same period, the unemployment rate dropped by 0.8 percentage point.

Retail sales at stores open more than a year, excluding Wal-Mart Stores Inc., increased 4.8 percent in January, compared with a 3.5 percent advance in December, the International Council of Shopping Centers said in a Feb. 2 statement.

Signs the economy is gathering momentum have propelled share prices. The Standard & Poor’s 500 Index is up 6.8 percent since the end of last year.

Consumer Sentiment
Job growth has helped support consumer sentiment and Americans may be less apprehensive about making big-ticket purchases. The Bloomberg Consumer Comfort Index rose in the week ended Feb. 5 to a one-year high.

Purchases of cars and light trucks in the U.S. climbed to an annualized rate of 14.1 million last month, the highest since the so-called cash-for-clunkers program in August 2009 and the second-strongest since May 2008, according to Autodata Corp. Sales averaged 16.4 million in the two years before the last recession began in December 2007.

The January gain came even as automakers reduced incentives by 5.6 percent, or about $144 per vehicle sold, to $2,435 in January, Woodcliff Lake, New Jersey-based Autodata said Jan. 31.

Older Vehicles
With the average age of cars and trucks rising to a record 10.8 years, analysts see pent-up demand boosting U.S. sales to a third-straight annual gain in 2012, the longest streak since sales peaked in 2000. An improving job market and available credit may propel an increase in vehicle sales of more than 6 percent from 2011 to 13.6 million, the average of 18 analysts’ estimates.

The auto industry pickup is helping drive manufacturing. Production at the nation’s factories, mines and utilities increased 0.6 percent in January, the most in three months, according to the median estimate of economists ahead of Feb. 15 figures from the Federal Reserve. Regional data from Philadelphia and New York may show that production in those districts also picked up in February.

Since November, “we’ve actually seen some improvements in backlogs,” Thomas Kadien, senior vice president of consumer packaging at International Paper Co. (IP), the world’s largest pulp and paper producer, said on a Feb. 2 conference call. “For at least the last three weeks, we’ve felt very good about the demand. From a North American perspective, the softness is behind us, and we feel much better about the first quarter.”

Business Inventories
To ensure enough goods are on hand, companies are replenishing warehouses. Business inventories climbed 0.4 percent in January after a 0.3 percent gain the prior month, according to the survey median ahead of Feb. 14 figures from the Commerce Department.

At the same time, further gains in gasoline costs pose a risk to Americans’ spending. Prices at the pump for regular unleaded gas have increased 22 cents since the end of 2011. The gain in January helped boost the consumer price index.

The cost of living climbed 0.3 percent last month, the first increase since September, economists project a Feb. 17 report from the Labor Department will show. Prices excluding volatile food and energy costs, the so-called core index, rose 0.2 percent last month after a 0.1 percent rise, the survey showed.

The housing market, the industry that precipitated the last recession, is showing signs of stabilization, a Feb. 16 report from the Commerce Department may show. Construction of new homes rose to a 671,000 annual pace in January from a 657,000 rate the previous month.

Homebuilders such as Miami-based Lennar Corp. (LEN) are optimistic.

“Consumers are beginning to realize that housing represents an undeniable value proposition, and accordingly demand is growing,” Stuart Miller, chief executive officer at Lennar, the third-largest U.S. homebuilder by revenue, said on a Jan. 11 conference call.

Bloomberg Survey

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Release Period Prior Median
Indicator Date Value Forecast
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Retail Sales MOM% 2/14 Jan. 0.1% 0.8%
Retail ex-autos MOM% 2/14 Jan. -0.2% 0.5%
Retail exauto/gas MOM% 2/14 Jan. 0.0% 0.5%
Business Inv. MOM% 2/14 Dec. 0.3% 0.4%
Empire Manu. Index 2/15 Feb. 13.5 14.8
Ind. Prod. MOM% 2/15 Jan. 0.4% 0.6%
Housing Starts ,000’s 2/16 Jan. 657 671
Building Permits ,000’s 2/16 Jan. 671 680
Initial Claims ,000’s 2/16 11-Feb 358 365
Philly Fed Index 2/16 Feb. 7.3 9.0
CPI MOM% 2/17 Jan. 0.0% 0.3%
Core CPI MOM% 2/17 Jan. 0.2% 0.2%
CPI YOY% 2/17 Jan. 3.0% 2.8%
Core CPI YOY% 2/17 Jan. 2.2% 2.2%
==============================================================

source: bloomberg.com