January Retail Sales Edge Up; Long-Term Outlook Still Pessimistic

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January Retail Sales Edge Up; Long-Term Outlook Still Pessimistic

WASHINGTON -- U.S. retail sales unexpectedly jumped 1 percent in January, reversing a six-month declining trend and defying economists' predictions by posting the biggest increase in 14 months.

However, sales appeared to be buttressed by higher gasoline prices and steep promotional activity as shoppers bought items on post-holiday discounts. Analysts cautioned that the relief is unlikely to last.

Excluding gas, auto sales and restaurants, retail sales were up only 0.5 percent seasonally adjusted from last month, and were down 2.1 percent unadjusted year-over-year, according to the National Retail Federation (NRF).

Wall Street economists surveyed by Thomson Reuters expected January sales to show a drop of 0.8 percent. They plunged a revised 3 percent in December, which marked the weakest holiday selling season since at least 1969, according to The Associated Press.

"This is a big surprise, though the net rise in sales is less impressive than it looks because (December and November) were revised down by 0.3 percent each," Ian Shepherdson, chief U.S. economist at High Frequency Economics, wrote in a research note. "The headline relief today is welcome but it is unlikely to last."

Although seasonal increases were encouraging for retailers, budget-conscious consumers still spent much less this year compared to last January, according to NRF. Electronic and appliance stores sales increased 2.6 percent seasonally adjusted from last month, but decreased 7.4 percent unadjusted year-over-year. Sales at clothing and clothing accessories stores increased 1.6 percent seasonally adjusted from December and decreased 8.0 percent unadjusted over last January.

"While 2009 got off to a surprising start, it’s going to be difficult for retailers to maintain this momentum," said NRF Chief Economist Rosalind Wells. "We expect the first half of the year to present challenges while giving way to sustained growth in the fourth quarter."

The January report shows strong increases in sales of automobiles and in general merchandise stores -- the "big box" outlets -- though sales by department stores, carrying fewer varieties of items, posted a decline.

Walmart Stores Inc., the world's largest retailer, is an example of a discounter that has benefited from strapped consumers' focus on necessities like groceries and on bargains for other items, according to the AP report.

Sales at gas stations jumped 2.6 percent in January -- the biggest increase since June, while sales of autos and parts rose 1.6 percent.

Nonstore retailers, such as Internet and mail-order shopping, advanced 2.7 percent in January, while sales of food and beverages rose 2.1 percent. Health and personal care stores registered flat sales last month.

Despite the leap last month, retail sales were down 9.7 percent from January 2008, amid the ravages of the recession, thousands of job losses and falling home prices, according to the report.

The Labor Department said retailers slashed roughly 45,000 jobs last month as they closed stores and tried to preserve cash while consumers curtailed spending.

Walmart said Tuesday it will cut 700 to 800 jobs at its Arkansas headquarters as it builds fewer new stores this year and makes other operational changes. The cuts are coming in Walmart's real estate, apparel, and health and wellness departments.

Macy's Inc. last week said it will eliminate 7,000 jobs, or almost 4 percent of its work force, while Bon-Ton Stores Inc. and apparel maker Liz Claiborne Inc. also disclosed major job cuts.

In the c-store industry during the past month, the industry’s largest retailer, 7-Eleven, announced it will reduce its North American workforce by approximately 200 positions, or 10 percent of its non-store, non-operations personnel; ConocoPhillips said it plans to lay off 4 percent of its workforce; and CITGO Petroleum Corp. began a restructuring, although it said the process would impact less than 2 percent of its 3,762 employees.

Additionally, passage into law of the expanded State Children’s Health Insurance Plan (SCHIP) -- which includes a massive hike in the federal excise tax on tobacco products -- could result in the loss of an estimated 10,000 jobs in the small, independent tobacco companies, including suppliers, vendors, distributors, shippers, processors and retailers, according to one tobacco industry executive.