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Retailers log gains; shoppers pull back

January clearance a hit, but now what?

– Sometimes, the devil is in the deals.

Americans shopped the winter clearance racks in January, resulting in strong sales during the month for retailers. But spending is expected to slow as the deals dry up, and as Americans begin to digest rising gasoline prices and a 2 percent payroll tax hike that started in January.

Noelle Perillo, 34, was certainly lured in by deals last month – she spent $100 on discounted holiday ornaments, home items and clothes for her toddler son – but she also says she may cut back going forward.

“I have what I need, and I am kind of shopped out. I’m set for now,” says Perillo, a freelance public relations consultant who lives in Silver Springs, Md. “When I hear things like gas prices spiking, that’s a concern.”

Overall, 20 retailers reported on Thursday that revenue at stores opened at least a year – an indicator of a store’s health – rose an average of 5.1 percent, according to the International Council of Shopping Centers. That’s above the trade group’s 3 percent estimate. It also marks the highest reading since last August when the figure was up 6 percent.

A group representing just about 13 percent of the $2.4 trillion U.S. retail industry report monthly revenue. Still, the data offers a snapshot of consumer spending, which has been heavily influenced by discounts during the economic downturn.

Retailers had already discounted heavily during the holiday season to get people to buy. January, which typically is the time when stores have clearance sales on winter merchandise to make room for spring items, caused them to slash prices even more.

But after the clearance goods disappeared last month, so did shoppers. Analysts say the absence of big discounts – coupled with the higher payroll tax and gas prices that have risen for the past 20 days – caused sales to taper off in the last week or so of the month.

Such pressures also hurt consumer confidence last month, which fell to the lowest reading in 14 months, according to the Conference Board.

Cato Corp., which sells moderately-priced women’s and girls’ clothing, said sales worsened throughout the month because of delays in shoppers’ tax refunds and the hit to their income from higher payroll taxes.

As a result, the company, which runs about 1,300 stores in the U.S., said revenue dropped 12 percent in January.

At a glance

Other economic reports released Thursday included:
Consumer borrowing: It rose in December for a fifth straight month as non-revolving credit surged by the most in 11 years. The $14.6 billion gain followed a revised $15.9 billion advance in November, the Federal Reserve said.
Worker productivity: It shrank at an annual rate of 2 percent in the final three months of 2012, the biggest drop since the first quarter of 2011. Productivity had risen at a 3.2 percent rate in the July-September quarter. Productivity shrank because economic activity contracted while hours worked rose.
Jobless claims: The number of Americans seeking unemployment aid fell last week to a level consistent with steady job gains. The Labor Department said weekly applications dropped 5,000 to a seasonally adjusted 366,000.

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