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February 12, 2016 9:00 AM, EST
US Retail Sales Increased in January in Broad-Based Advance
Nathan Rupert/Flickr

Retail sales increased for a third straight month in January as Americans kicked off 2016 by spending freely on cars, clothing and online merchandise.

The 0.2% gain matched the previous month’s advance that was initially reported as a decline, Commerce Department data showed Feb. 12. The median forecast in a Bloomberg News survey called for a 0.1% increase in January. Excluding cheaper gasoline, which depressed service-station receipts, purchases climbed 0.4%.

Greater job security, improving wage growth and falling gasoline prices may be persuading more consumers to loosen their purse strings after a fourth-quarter slowdown. A pickup in household purchases, which account for the lion’s share of the economy, would help the U.S. stave off the negative effects of a strengthening dollar, sluggish foreign demand and tumultuous financial markets.

“Consumer fundamentals still look very strong,” said Bricklin Dwyer, an economist at BNP Paribas in New York. “We had really strong real incomes at the end of last year, and that’s going to feed through to consumption.”

Estimates in the Bloomberg survey ranged from a decline of 0.5% to a 0.4% gain. December retail sales were revised up to a 0.2% advance, previously reported as down 0.1%.

The retail figures used to calculate gross domestic product, which exclude categories such as food services, auto dealers, home-improvement stores and service stations, increased 0.6% in January, the most since May, after falling 0.3% the month before.

Economists are looking for a pickup in consumer spending to help buoy growth this quarter after the expansion slowed to a crawl at the end of 2014. Gross domestic product grew at a 0.7% annualized rate in the fourth quarter as companies adjusted inventories and cut back on capital investment.

Eight of 13 major categories showed increases in demand in January from the prior month, the retail figures showed. Purchases made online climbed 1.6%, the most in 11 months. Sales at general merchandise outlets rose 0.8%, the biggest advance since May.

Demand held up even after a winter storm moved through the Mid-Atlantic and Northeast regions late last month. Snow blanketed cities from Baltimore to New York and caused power outages, more than 13,000 flight cancellations and severe coastal flooding, according to the National Oceanic and Atmospheric Administration.

Continued strength in the labor market is keeping Americans spending. Employers added 151,000 to payrolls in January after expanding headcounts by 262,000 the month before. Wage growth also showed signs of life. Average hourly earnings climbed 2.5% in the 12 months ended January after a 2.7% gain in December that was the most since 2009.

Automobile dealers’ sales increased 0.6% in January after rising 0.5% the prior month, according to the retail report. That corroborates industry figures that showed automakers reported the strongest U.S. January sales in almost a decade.

Purchases of cars and light trucks came in at a 17.5 million annualized rate last month, the most for any January since 2006, based on Ward’s Automotive Group data. Sales totaled 17.4 million last year as cheaper gasoline and low interest rates helped boost demand for SUVs and pickups.

Receipts at gasoline stations dropped 3.1% last month, the most since September, the retail sales report showed. The Commerce Department’s retail sales data aren’t adjusted for changes in prices. The cost of an average gallon of regular gasoline was $1.72 as of Feb. 9, the lowest level in seven years.

A separate report, released by the Labor Department, showed import prices declined 1.1% in January for a second month, reflecting a plunge in petroleum costs.