Retail sales fell more than Wall Street expected in January, raising questions about whether the resilient American consumer may be losing ground.
Retail sales decline 0.8% in January than the previous month, according to Census Bureau data. Economists had expected a 0.2% decline in spending, according to Bloomberg data. Retail sales for December had previously reported a surprise increase of 0.6%, but that was revised down to 0.4% in Thursday's statement.
The month-on-month decline in January was the largest since March 2023.
National Chief Economist Kathy Posjancic noted that seasonal adjustments and Bad weather During January this will likely put pressure on sales during the month. But the overall trend of consumer slowdown is something economists have been waiting for.
“We expected consumers to curb their spending this year after withdrawing pandemic-related savings, pushing the savings rate well below pre-pandemic levels, and increasing their reliance on credit,” Bostiancic wrote in a note to clients.
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January sales, excluding autos and gas, fell 0.5% compared to estimates for a 0.2% increase.
Nine of the 13 categories highlighted in the release saw declines from a month ago. Building materials and garden equipment led the declines, down 4.1%, while sales at miscellaneous retail stores fell 3%.
Meanwhile, sales at furniture and home stores led the gains, rising 1.5% from the previous month.
January report Investors were expected to be watching closely looking for signs of a “soft landing” in the US economy, as inflation cools to the Federal Reserve's target rate of 2% without a sharp decline in economic activity.
This was the second economic data point released this week that challenged the odds of this scenario. On Tuesday, the latest Consumer Price Index (CPI) report showed prices rose 3.1% in January, more than the 2.9% increase economists had expected, raising questions whether inflation is on a steady path down to the Fed's target of 2. %.
In an interview with Yahoo Finance, Mohamed El-Erian, Allianz's chief economic advisor, cautioned against reading too much into one publication, but noted that the retail sales number may be more worrying than the inflation reading to the extent that it reflects the economy's weakness.
“American exceptionalism depends on the ability to continue growth and growth supported by the household sector and retail sales,” Al-Erian said. “That's why we've outperformed other economies. That's why our stock market is doing so well. It's the ability to grow.”
Another economist, on the other hand, noted that Tuesday's data could ease any lingering concerns about an active economy leading to higher inflation.
“Overall, real consumption appears to have declined in January, and even allowing for a recovery through February and March, growth will slow sharply in the first quarter,” Andrew Hunter, deputy chief U.S. economist at Capital Economics, wrote in a note to clients. . “The upshot is that Fed officials may not need to worry for much longer about the potential for continued economic resilience to reignite inflation.”
Josh Schaeffer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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