NEW YORK - 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 heading into the spring and Americans digest rising gas prices and a 2 percent payroll tax hike that started in January.
Noelle Perillo, 34, was certainly lured in by deals last month. She says that she spent a total of $100 in January on deeply discounted holiday ornaments, home items and clothes for her toddler son. But she also says her spending may slow in the months ahead.
"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. "I am optimistic that things will improve, but 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 and the 4.5 percent increase posted in December. It also marks the highest reading since last August when the figure was up 6 percent.
Only a small group of stores that represent about 13 percent of the $2.4 trillion U.S. retail industry report monthly revenue. But the data offer a snapshot of consumer spending, which has been heavily influenced by big discounts during the economic downturn.
Retailers are coming off a ho-hum holiday season in which they had to do a lot of discounting to get shoppers to buy. And January, which marks the end of retailers' fourth quarter, typically is the time when stores have clearance sales on winter merchandise to make room for spring items.
But once the clearance goods disappeared last month, so did shoppers. Analysts say the absence of big discounts - coupled with gas prices that have risen for the past 20 days and the higher payroll tax - 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 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.