Cold Weather, Shopper Turmoil Turn January Sales Sluggish

Retail sales slumped at the end of January, according to the International Council of Shopping Centers, and the news was another indicator from a major U.S. retail trade group that the economy is sluggish.

Released on Jan. 29, the ICSC and Goldman Sachs Weekly Chain-Store Sales Index noted that sales declined 1 percent in the week ending Jan. 26, compared with the previous week, which ended on Jan. 19. All four weeks in January were marked by declining sales when compared with the prior weeks. But January sales showed solid increases over the previous year. Sales for the week ending Jan. 26, for example, increased 2 percent over the previous year. January’s sluggish showing could be blamed on a number of reasons, primarily the colder-than-usual weather, which kept people in their homes, said Michael Niemira, ICSC vice president of research and chief economist. “In addition, higher fuel prices for the week, the backdrop of higher payroll taxes and little incentive to shop during this season’s slow period gave consumers the excuse to spend less both sequentially and on a year-over-year basis,” Niemira said.

January’s slow business may be the ongoing effect of a slight economic contraction. The U.S. economy contracted 0.1 percent in the fourth quarter, according to the U.S. Commerce Department. The Federal Reserve also noted in a Jan. 30 statement that the American economy “paused in recent months” because of disasters such as Superstorm Sandy, which wreaked billions of dollars of damage on the Eastern Seaboard in late October. However, the Fed also noted that the economy is showing signs of improvement, with employment and the housing sector growing moderately.

The National Retail Federation forecast that the upcoming year is going to be marked by a slow economy. On Jan. 28, the NRF released its 2013 economic forecast. The prominent trade group predicted retail industry sales—excluding automobiles, gas stations and restaurants—will increase 3.4 percent in the upcoming year, less than the 4.2 percent growth for 2012, said Matthew Shay, NRF president and chief executive officer.

“What we witnessed during the holiday season is an indication of what we are likely to see in 2013. Consumers read troubling economic headlines every day and look at their bottom lines at the end of the month, and they don’t like what they see,” Shay said.

A bright spot for the economy will continue to be e-commerce, according to the NRF forecast. Online sales are forecast to increase from 9 percent to 12 percent in 2013. But even e-commerce is not immune from hard economic times.

On Jan. 29, e-commerce giant Amazon.com Inc. announced its sales for the fourth quarter of its 2012 fiscal year. While revenue increased 22 percent, to $21.27 billion, compared with the previous year, net income declined 45 percent to $97 million. The Seattle-headquartered company missed Wall Street estimates, which expected Amazon to report revenues of $22.26 billion.

Despite a sluggish beginning to the year, 2013 should end with faster growth, said Kimberly Ritter-Martinez, an economist with the Los Angeles County Economic Development Corp.

“2013 will look a lot like 2012,” she said in a recent interview. “We’re going to get off to a slow start, and we’re going to see faster growth toward the end of the year.” — Andrew Asch