United States: Retail sales dip in January
Retail sales unexpectedly dropped 0.3% from the previous month in January, sharply contrasting the 0.3% month-on-month increase that market analysts had expected, as well as the downwardly revised flat reading recorded in December (previously reported: +0.4% month-on-month). January’s drop, the largest since February 2017, and December’s downward revision suggest private consumption growth is on a softer footing than previously thought.
January’s fall in sales was broad-based. Motor vehicle sales performed poorly, dropping 1.3% on a month-on-month basis. Building material retailers also saw sales decline 2.4%, partly reflecting particularly severe weather conditions in January. In addition, sales dropped 1.2% at health and personal care stores and 0.4% at furniture outlets compared to the previous month. Non-store retailers, a component dominated by e-commerce, saw flat sales in January, after registering a moderate increase in December. Meanwhile, gas stations increased their mom sales 1.6%, reflecting higher fuel prices, and clothing sales rose 1.2%, also driven by higher prices registered in January and in line with CPI data that shows apparel prices accelerated on a mom basis.
In annual terms, growth in retail sales dipped to 3.6% in January from a downwardly revised 5.2% in the previous month (previously reported: +5.4% year-on-year). Annual average retail sales growth edged down to 4.4% in January, following a nearly five-year high of 4.6% in December.
It remains to be seen whether the deteriorating sales performance will be transitory or starts developing into a trend. However, the weak sales numbers in January and downward revisions to previous months indicate consumer spending lost momentum starting the year, which may hurt expectations for strong fourth-quarter GDP results to be released later this month.