Retail gain beats forecast in December

Sales pushed 0.2% higher by holiday bargain hunters, confidence boost

Shoppers cross a street in San Francisco on Christmas Eve in 2013. Retail sales beat forecasts for December despite bad weather and a drop in automobile sales.
Shoppers cross a street in San Francisco on Christmas Eve in 2013. Retail sales beat forecasts for December despite bad weather and a drop in automobile sales.

WASHINGTON - Retail sales rose more than forecast in December as consumers snapped up Christmas gifts amid year-end discounting, giving the world’s biggest economy a lift at the end of 2013.

Purchases increased 0.2 percent after a 0.4 percent advance in November that was smaller than previously reported, the Commerce Department said Tuesday. The median forecast of 86 economists surveyed by Bloomberg called for a 0.1 percent gain. Excluding cars, demand jumped by the most in almost a year.

Christmas-season deals probably helped retailers overcome the coldest December in four years. At the same time, improving confidence owing to falling unemployment and further healing in the housing market is likely to support household spending, which accounts for almost 70 percent of the economy, in 2014.

“There is the hope that the momentum is going to continue and the good news will feed on itself,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Fla. “Better spending will lead to more jobs, and more jobs will lead to more spending.”

Estimates in the Bloomberg survey ranged from a decline of 0.5 percent to a 0.6 percent gain. November’s reading was revised from an initially reported 0.7percent increase.

The December gain should be enough to help generate 3 percent annualized growth in the economy in the final three months of 2013, said Paul Dales, senior U.S. economist at Capital Economics.

“If we’re right in thinking that the underlying trend in jobs growth is still improving, households will continue to spend more freely in 2014,” Dales said.

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

Another report Tuesday showed the costs of goods bought from abroad were little changed in December, indicating little inflation pressure from overseas. The unchanged reading in the import-price index came after 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.

Seven of 13 major merchant retailer categories showed gains last month, Tuesday’s Commerce Department report showed. The increases were paced by a 2 percent jump at grocery and beverage stores that was the biggest since October 2006.

Sales at automobile dealers dropped 1.8 percent, the most since October 2012, after gaining 1.9 percent in November, Tuesday’s report showed.

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. Winter storms on the East Coast and in the Midwest last month slowed sales gains at General Motors for the year. All of the biggest automakers in the United States 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 operation, said on a Jan. 3 sales call. “That definitely had an impact, no question.”

Still, automakers completed their best sales year since 2007 and are upbeat about the year ahead. Dearborn, Mich.-based Ford Motor Co., 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.

Purchases excluding auto dealers climbed 0.7 percent in December, the biggest gain since February, Tuesday’s report showed. In addition to food stores, other retailers showing increased demand included clothing stores, restaurants and pharmacies.

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.

While last month’s reading beat the 0.3 percent median forecast of economists surveyed by Bloomberg, downward revisions for the prior two months mean analysts probably won’t significantly change estimates for fourth-quarter consumer spending after Tuesday’s report.

Spending dropped for the first time since 2009 in the weekend after Thanksgiving despite merchants extending deep discounts, according to the National Retail Federation. That period included the start of December since Thanksgiving fell later in the calendar last year.

Store traffic plunged 10.2 percent in the week ending Dec. 7 compared with a 2.3 percent gain in the week after Thanksgiving in the prior year, according to data from researcher ShopperTrak.

Conversely, online shopping surged about 20 percent to a record on the Monday after Thanksgiving as consumers took to the Internet to buy gifts. Sales increased 1.4 percent at non-store retailers in December after a 1.6 percent gain the prior month, Tuesday’s report showed. That was the biggest two-month advance since October-November 2012.

U.S. companies built up their stockpiles in November as their sales improved. Continued growth in inventories suggests businesses believe consumers will increase spending in the months ahead.

In a separate report, the Commerce Department said Tuesday that business stockpiles grew 0.4 percent in November. That follows a strong 0.8 percent gain in October. Sales increased 0.8 percent in November after a 0.5 percent gain the previous month.

Information for this article was contributed by Michelle Jamrisko and Chris Middleton of Bloomberg News and Josh Boak of The Associated Press.

Front Section, Pages 1 on 01/15/2014

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