Retail sales up 0.4% in January; Trump touts a tax overhaul

President Donald Trump speaks during a meeting with retail industry leaders Wednesday in the Roosevelt Room of the White House in Washington.
President Donald Trump speaks during a meeting with retail industry leaders Wednesday in the Roosevelt Room of the White House in Washington.

WASHINGTON -- Americans spent more at gasoline stations and restaurants in January, raising retail sales despite a drop in auto sales.








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Retail sales rose a seasonally adjusted 0.4 percent, down from a solid 1 percent gain in December, the Commerce Department said Wednesday.

Overall sales pulled back from a December bump in Christmas shopping online and at auto dealers. But Americans spent more than normally expected last month at clothiers, department stores, electronics outlets and sporting goods retailers.

The gains point to continued economic growth. But they also indicate that improving consumer sentiment after President Donald Trump's presidential election, especially optimism among Republicans, has yet to significantly increase retail sales.

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Trump told executives at major retail chains Wednesday that he would swiftly submit a tax overhaul plan to stimulate the economy.

Trump called rewriting the tax code "one of the best opportunities to really impact our economy," during a White House breakfast with chief executives of companies including Target Corp., J.C. Penney Co. and Gap Inc., who came to Washington to discuss their opposition to a House Republican plan to tax U.S. businesses' domestic income and their imports while exempting their exports.

The president said he would be releasing a proposal in the "not so distant future."

The retailers have argued that the border-adjusted levy will raise prices for U.S. consumers.

Trump didn't address concerns about border adjustments during a brief photo session reporters were invited into at the start of the meeting. Instead, he praised the CEOs as "great retailers" that "I've read about on the covers of business magazines."

Higher gasoline prices drove a 2.3 percent sales increase at service stations last month. Gasoline prices climbed 7.8 percent between January and December, according to a separate Labor Department report released Wednesday. The retail sales report does not adjust its figures for prices.

Purchases at restaurants and bars climbed 1.4 percent. Building materials stores saw a slight 0.3 percent gain.

But sales at auto dealers slipped 1.2 percent, a sharp pull back after jumping 2.9 percent in December.

Sales at nonstore retailers such as Internet outlets were flat in January, although they have climbed 12 percent over the past year as more Americans prefer to shop via their computers and phones.

Over the past 12 months, total retail sales have risen a solid 5.6 percent. The greater spending likely reflects the improving job market. Employers added 227,000 workers in January, while the unemployment rate ticked up slightly to 4.8 percent because more people started looking for jobs and were counted as unemployed.

"Sales are growing at a decent clip, but the surge in consumers' confidence since the election is yet to translate into stronger spending," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

U.S. consumer prices rose in January at the fastest pace in nearly four years, strengthening the case for the Federal Reserve to raise interest rates this year.

"The economy is still chugging along," said Scott Brown, St. Petersburg, Fla.-based chief economist for Raymond James Financial Inc. "Consumer spending is still pretty healthy. Inflation is getting closer to the Fed's goal. This is a green light for the Fed to raise rates in coming months."

The Labor Department said Wednesday that consumer prices rose 0.6 percent last month, the most since February 2013 and twice what economists were expecting. The jump in gasoline prices accounted for nearly half the increase.

Stripping out food and energy prices, which tend to fluctuate sharply from month to month, core consumer inflation rose 0.3 percent in January. Fed policymakers monitor core measures of inflation especially closely.

Food prices rose in January for the first time in seven months. Grocery prices were unchanged, but the cost of restaurant meals rose 0.4 percent. The price of clothing, new cars, auto insurance and airfare all rose by 0.8 percent or more in January.

Overall, consumer prices rose 2.5 percent from a year earlier, most since March 2012. Core inflation rose 2.3 percent over the last 12 months.

After remaining low in the aftermath of the 2007-09 recession, inflation is running above the Fed's 2 percent annual target.

The Fed left a key interest rate unchanged at its meeting on the Jan. 31 to Feb. 1 time period. It raised rates in December for only the second time in a decade.

But with uncertainties surrounding President Donald Trump's proposals on taxes, spending and trade, Yellen said the Fed still wants to keep assessing the economy.

U.S. factory output in January increased for the fourth time in five months amid gains in machinery and chemicals, extending a gradual recovery in manufacturing.

Production at factories, which make up about 80 percent of all output, increased 0.2 percent in January from the previous month, a Federal Reserve report showed Wednesday. That matched the median forecast in a Bloomberg survey. Total industrial output, which includes mining and utilities, fell 0.3 percent as warm weather reduced demand for heating, with utility production falling the most in 11 years.

Healthy consumer spending and a recovery in the oil sector have supported recent gains in manufacturing, with a key gauge of industry rising last month to the highest since November 2014. At the same time, modest overseas demand, a strong U.S. dollar and soft investment in equipment from domestic firms have made for slow progress.

Information for this article was contributed by Josh Boak and Paul Wiseman of The Associated Press, and by Patricia Laya, Shobhana Chandra, Matthew Townsend and Shannon Pettypiece of Bloomberg News.

Business on 02/16/2017

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