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Retailers Report Strong January Sales Despite Payroll Tax Rise

NEW YORK — In further evidence that the economy's private sector is gaining steam, U.S. chain-store retailers sizzled in January, posting a gain of 4.5% compared to last year. According to the International Council of Shopping Centers (ICSC), the January industry performance was the strongest since September of 2011, which saw a +5.5%. One factor contributing to the uptick in sales was the strong end-of-season bargain hunting at department and apparel stores.

It was argued that the increase in payroll taxes as part of a Washington deal in the beginning of January to avert a "fiscal cliff" would significantly hamper consumer buying and bring down the economy. Shoppers' take home pay was reduced by higher payroll taxes.

"Despite worries of a 'fiscal drag' due to higher payroll taxes, consumers were out shopping for bargains and clearance items," said Michael P. Niemira, vice president of research and chief economist for ICSC.

For the fiscal year of 2012, U.S. chain store sales posted a 2.1% gain–held back by a 4.5% decline in the drug store segment. Excluding drug stores, industry sales rose 4.4% in the fiscal year of 2012, which was moderately weaker than the industry's 2011 strong gain of 5.3%.

For February, ICSC research anticipates that the sales pace will moderate to somewhere between 2.75% to 3.0% in total and about 3.5%, excluding drug stores.

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