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US retail sales surge 1.1% in February

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(Globalpost/GlobalPost)

US retail sales picked up sharply in February despite a payroll tax hike, driven largely by a surge in gasoline prices, government data released Wednesday showed.

Retail and food services sales rose 1.1 percent from January, the Commerce Department reported, much stronger than the 0.5 percent increase estimated by analysts.

The department revised upward the January increase in retail sales to 0.2 percent.

The February gain was the biggest in five months, pushing year-over-year sales up 4.6 percent from February 2012.

Gasoline sales at the pump jumped 5.0 percent, after a 3.6 percent rise in January, as gasoline prices soared over the period.

Automobile sales rebounded, rising 1.1 percent after falling 0.3 percent in January, and building materials and garden supplies sales increased 1.1 percent.

Excluding auto sales, which tend to be volatile month-over-month, retail sales rose 1.0 percent, double the gain expected.

Online shopping rose 1.6 percent.

The robust February numbers came despite consumers' smaller paychecks after the January 1 expiration of a payroll tax cut.

The report suggested resiliency in consumer spending, which accounts for 70 percent of US economic activity.

"At least so far, the increase in taxes has had minimal impact on household spending, showing that the economy retains a lot of momentum," said Joel Naroff of Naroff Economic Advisors.

Growth was not broad-based. Consumers cut back spending on furniture and home furnishings and in department stores, sporting goods, book and music stores, and restaurants and bars.

Core retail sales, those excluding autos, gasoline and building materials -- a better indication of the pace of consumer spending -- were up 0.4 percent.

"We estimate the data are consistent with total real consumption rising at around a 2.8 percent annual rate so far in Q1, up from a 2.1 percent pace in Q4," said Jim O'Sullivan of High Frequency Economics.

"That is an impressive performance given the hit to spending power from the payroll tax hike."

Scott Hoyt of Moody's Analytics cautioned that the near-term outlook was "modest at best" and risks were tilted toward a weaker performance.

In addition to the tax hike, expected layoffs and furloughs due to the massive "sequester" government spending cuts and uncertainty over fiscal policy would take a toll, he warned.

"Consumers will not consistently lead the recovery."

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http://www.globalpost.com/dispatch/news/afp/130314/us-retail-sales-surge-11-february