US retail sales expected to post slight gain in February

WASHINGTON – Americans likely spent cautiously in February at retail businesses, balancing a surge in hiring against higher taxes and gas prices.

Economists forecast that retail sales rose 0.2 per cent in February from January, according to a survey by FactSet. That would be only slightly better than January’s 0.1 per cent increase.

The Commerce Department will release the report at 8:30 a.m. EDT Wednesday.

The retail sales report is the government’s first look at consumer spending, which drives about 70 per cent of economic activity. A private survey of major retailers released last week suggests that consumers boosted spending last month but at a slower pace than January.

Some of the anticipated increase likely went to cover higher gas prices. The national average price for a gallon of gas went from $3.42 on Jan. 31 to $3.78 on Feb. 28.

Still, any gain would indicate that Americans kept spending in February despite an increase in Social Security taxes that has lowered take-home pay this year for anyone collecting a paycheque. Someone earning $50,000 has about $1,000 less to spend in 2013. A household with two high-paid workers has up to $4,500 less.

Consumers may be able to absorb higher taxes if employers continue hiring and increasing wages.

The economy added 236,000 jobs in February, driving the unemployment rate down to 7.7 per cent, its lowest level in more than four years. The gains signal that companies are confident enough in the economy to intensify hiring even in the face of tax increases and government spending cuts.

Since November, employers have added an average of 205,000 jobs a month, up from 154,000 a month in the previous four months. The hiring spree has been fueled by steady improvement in housing, auto sales, manufacturing and corporate profits, along with record-low borrowing rates.

An improving in job market has also helped lift consumer confidence. And if it continues, it could provide a spark to growth after a dismal fourth quarter of 2012.

Many analysts believe the U.S. economy will grow a modest 2 per cent this year. While job gains should help provide some momentum, growth will likely be held back by uncertainty about the federal budget, higher Social Security taxes and across-the-board government spending cuts that kicked in March 1.