- Value of purchases dropped 0.8% in January after down revision
- Building material stores, auto dealers led the decline
US retail sales broadly declined in January, indicating consumers took a breather after a strong holiday shopping season.
The value of retail purchases, unadjusted for inflation, decreased 0.8% from December after a downward revision to the prior month, Commerce Department data showed Thursday. The drop was the biggest in nearly a year.
Separate data showed US factory production fell for the first time in three months in January. The two reports pointed to a loss of momentum last month, but they’re not necessarily a sign of significant deterioration in the economy.
So far, a robust labor market and easing inflation have allowed consumers to keep spending. Recent manufacturing surveys suggest the worst of the slump is over in the sector and homebuilder sentiment rose to a six-month high this month.
“Even as we expect spending will moderate this year, the January slowdown may overstate the near-term pull back in consumption,” Wells Fargo & Co economists Tim Quinlan and Shannon Seery Grein wrote in a note. “A still-sturdy labor market should lead to only a gradual moderation, rather than collapse in spending this year.”
| Metric | Actual | Estimate |
|---|---|---|
| Retail sales (MoM) | -0.8% | -0.2% |
| Sales ex. autos (MoM) | -0.6% | +0.2% |
| ‘Control group’ sales (MoM) | -0.4% | +0.2% |
Nine of 13 categories posted decreases in the retail-sales report, led by building materials stores and auto dealers. Some economists have attributed the broad-based weakness in part to severe winter weather that ravaged the US in January.
So-called control-group sales — which are used to calculate gross domestic product — dropped 0.4% in January, the first decline since March. The measure excludes food services, auto dealers, building materials stores and gasoline stations.
Treasury yields slid and the S&P 500 index rose while the dollar tumbled.
What Bloomberg Economics Says…
“Consumers pulled back on spending following the holiday season and amid colder weather — largely as expected. However, even with spending weakness concentrated in interest-rate sensitive categories, January’s pullback was broad-based as consumers tighten their belts amid higher borrowing costs and credit-card delinquencies.”
— Estelle Ou. To read the full note, click here
The retail figures largely reflect purchases of merchandise, which comprise a relatively narrow share of overall consumer outlays. A separate release due later this month will show January spending on goods and services, and those figures are adjusted for inflation.
Thursday’s figures showed purchases made at restaurants and bars — the only service-sector category in the report — climbed 0.7% last month. Receipts at grocery stores rose by a similar amount.
| How Executives See It |
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Data out Tuesday showed US consumer prices jumped at the start of the year amid a pickup in service costs, while a months-long decline in the price of goods continued to offer Americans some relief.
A separate report showed that initial applications for unemployment benefits fell to 212,000 last week, pointing to a steady labor market. The median forecast in a Bloomberg survey of economists called for 220,000.
Written by: Augusta Saraiva — With assistance from Chris Middleton, Matthew Boesler, Nazmul Ahasan, Michael Sasso, and Mark Niquette @Bloomberg
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