U.S. Retail Sales Rise Modestly in January

 

• Retail sales in January 2013 rose by an expected 0.1% following 0.5% gains in both December and November 2012.
• The month saw very muted gains in the usually more volatile components with motor vehicles down only 0.1% and gasoline stations up only 0.2%.
• Excluding autos and gasoline stations, sales rose 0.2% following upwardly revised gains in December and November of 0.7% and 0.8%, respectively.
• The slowing in retail sales in January followed strong gains in the last two months of 2012 that likely reflected advancing purchases from the new year in the face of aggressive price discounting through the Christmas sales period. Given continued job gains during the start of 2013, we assume that this slowing in sales will prove to be temporary and that greater strength will emerge going forward. This is expected to result in the consumer spending component of GDP continuing to grow in the first quarter of 2013 although with the annualized pace easing to 1.7% from an already modest gain in the fourth quarter of 2012 of 2.2%. To try and strengthen this pace of activity during the remainder of this year and next, Fed policy is likely to remain highly accommodative.

Retail sales in January 2013 rose by an expected 0.1% although this implied building further onto solid gains of 0.5% in both December and November 2013. January saw very muted monthly changes in some of the more volatile components. For example, sales at motor vehicle dealerships fell by a marginal 0.1% while receipts at gasoline service stations rose by only 0.2%. Sales at building material stores rose by 0.3%, which matched the December increase although was down from a 1.2% gain in November.

The so called ‘control’ measure, which excludes sales at motor vehicle dealerships, gasoline stations, and building material stores, indicated sales rising only 0.1% in the month. This built further on solid and upwardly revised gains in December of 0.7% (0.6% previously) and in November of 0.7% (0.5% previously). The control measure represents the component of retail sales that is included in the GDP calculation for consumer spending. The upward revisions to the previous two months implies slightly stronger consumer spending late in 2012, which will likely contribute to a slight upward revision to fourth-quarter 2012 GDP growth. We are currently monitoring an upward revision to fourth-quarter 2012 GDP growth to an annualized 0.2% increase from an initially estimated decline of 0.1%.

The slowing in retail sales in January followed strong gains during the last two months of 2012 that likely reflected advancing purchases from the new year in the face of aggressive price discounting during the Christmas sales period. As well, the payroll tax hike at the start of 2013 likely had some dampening effect on spending; however, given continued job gains during the start of 2013, we assume that this slowing in sales will prove to be temporary and that greater strength will emerge going forward. This is expected to result in the consumer spending component of GDP continuing to grow in the first quarter of 2013 although with the annualized pace easing to 1.7% from an already modest gain in the fourth quarter of 2012 of 2.2% (possibly to be revised up to 2.3%). To try and strengthen this pace of activity for the remainder of this year and next, Fed policy is likely to remain highly accommodative. The current low range for fed funds of 0.00% to 0.25% expected to be maintained into 2015.

Information contained in this report has been prepared by the Economics Department of RBC Financial Group based on information obtained from sources considered to be reliable. While every effort has been made to ensure accuracy and completeness, RBC Financial Group makes no such representation or warranty, express or implied. This report is for information purposes only and does not constitute an offer to sell or a solicitation to buy securities.

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