US retail sales hit by increase in payroll taxes

WASHINGTON: Retail sales in the US rose at a slower pace in January as an increase in payroll taxes took a bite out of consumers' paychecks.

The 0.1 per cent climb followed an unrevised 0.5 per cent increase in December, Commerce Department figures showed today in Washington. The advance matched the median forecast of 80 economists surveyed by Bloomberg.

A two percentage-point increase last month in the levy that funds Social Security reduced take-home pay, countering some of the gains in household disposable income from an improving job market. At the same time, more employment, combined with higher property values and stock prices, supports consumers and adds traction to purchases that make up about 70 per cent of the economy.

"The payroll tax increase is having some impact on spending here," said Thomas Simons, an economist with Jefferies Group Inc. in New York, whose firm after today's report is the second-best forecaster of retail sales for the past two years.

Prices of goods imported into the US rose in January for the first time in three months, led by more expensive fuel and building materials, a report from the Labor Department also showed today.

The 0.6 per cent gain in the import-price index followed a revised 0.5 per cent decline in December that was larger than initially estimated.