Retail sales in the United States declined more than expected in January, dragged down by lower receipts at auto dealerships and petrol stations.
Retail sales fell 0.8 per cent last month, according to the Commerce Department’s Census Bureau, with winter storms likely contributing to the decline. Data for December was revised down, with sales gaining 0.4 per cent rather than 0.6 per cent as first reported.
Reuters polled economists, who predicted a 0.1 per cent decline in retail sales. Retail sales are mostly products and are not adjusted for inflation.
The autumn came after a somewhat solid performance throughout the holidays. December sales are further aided by generous seasonal adjustments, which the government uses to remove seasonal swings from the statistics.
January typically sees a decline in unadjusted retail sales, and in this case, the seasonal factors were less supportive compared to previous years, contributing to a significant drop in adjusted sales last month.
Economist Daniel Silver from JP Morgan in New York emphasised the challenge of determining the precise seasonal factor for a given month. He pointed out that the seasonal factors for December 2023 and January 2024 appear unusual compared to earlier years, suggesting caution in interpreting individual seasonally adjusted changes for these months when assessing data trends.
Before the data release, economists had already warned against placing too much significance on any sharp drop in retail sales.
Though growth is expected to decelerate this year, consumer spending remains robust due to a strong labour market and increased household buying power as inflation falls.
Separate data from the Labour Department on Thursday showed that initial claims for state unemployment benefits declined 8,000 to a seasonally adjusted 212,000 for the week ending 10 February.
Despite a recent surge of high-profile layoffs, mostly in the technology and media industries, claims remain at low levels. Economists had predicted 220,000 claims for the most recent week.
With the labour market relatively tight, some laid-off workers may be able to readily find new positions. Companies are often hesitant to lay off employees after trying to replace positions during and after the COVID-19 outbreak.
Retail sales excluding vehicles, petrol, construction materials, and food services fell 0.4 per cent in January. The so-called core retail sales metric is most closely related to the consumer spending component of GDP.
Core sales for December were revised downward to rise 0.6 per cent instead of the previously reported 0.8 per cent. Economists expect significant service spending growth in January, which should keep overall consumer spending stable.
Consumer spending, which accounts for more than two-thirds of US economic activity, accelerated in the fourth quarter, adding to the economy’s 3.3 per cent annualised growth rate. The economy grew by 4.9 per cent in the July-September quarter.
