Hi °C | Lo °C AMERICAN consumers are starting to regain confidence as an improving job market eases the strain caused by a higher payroll tax.
The Bloomberg Consumer Comfort Index climbed to minus 36.3 last week, marking the first gain since the two percentage point increase in the levy that funds Social Security took effect at the start of the year. Another report showed fewer workers filed claims for jobless benefits last week.
Chains including Macy's, Gap and Target yesterday reported January sales that topped analysts' estimates, indicating gains in hiring, stock prices and home values are helping make up for the reduction in take home pay.
At the same time, climbing petrol costs and looming cuts in government spending may prevent the world's biggest economy from making a stronger comeback following a fourth-quarter slump.
"The next few months are going to be difficult for the economy given the fiscal drag, and the job market may make or break the next few months," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania.
"The job market needs to generate the wage income necessary to support spending."
Shares retreated after a two-day advance in the Standard & Poor's 500 Index as ECB president Mario Draghi signalled the strength of the euro may hamper the region's economic recovery.
Benefits
A report from the Labour Department showed the number of applications for jobless benefits in the US fell by 5,000 to 366,000 last week. Economists forecast 360,000, according to the median of 53 estimates in a Bloomberg survey.
The Consumer Comfort Index climbed last week from minus 37.5 in the previous seven days, the weakest since early October.
"An easing of policy tensions in Washington and sustained improvement in the labour market likely prevented further deterioration" in sentiment, said Joseph Brusuelas, a senior economist at Bloomberg.
Same-store sales at Cincinnati-based Macy's, the second- biggest US department store chain, advanced about 12pc, beating projections of 5pc from analysts surveyed by researcher Retail Metrics.
San Francisco-based Gap, the biggest US clothing chain, boosted sales 8pc, double the average estimate of 4pc.
Target, based in Minneapolis and the second-biggest US discounter, posted a gain of 3.1pc, above projections of 1.7pc.
Households boosted their purchases at a 2.2pc annual rate in the final three months of 2012, up from 1.6pc in the third quarter, Commerce Department data show. (Bloomberg)
Irish Independent
