Spending at US retailers tumbled much more than expected in January as cold weather across the United States kept shoppers at home after a robust holiday spending season.
Retail sales, which captures spending on all goods and food services, fell 0.8% in January, the Commerce Department reported Thursday, breaking a two-month streak of increases. That was even lower than the downwardly revised 0.4% increase in December, and well below economists’ expectations of a 0.1% decline, according to FactSet. The figures are adjusted for seasonal swings but not inflation.
Spending declined across various categories last month, including at gas stations and home improvement stores, likely due to the cold weather, falling 1.7% and 4.1%, respectively. Online sales contracted 0.8%.
Meanwhile, sales at restaurants and bars rose 0.7% in January.
Americans are being squeezed by elevated interest rates, still-high inflation and a harder time accessing credit, as many continue to draw down their pandemic savings, but one major bright spot is that the job market remains in decent shape. Robust earnings results from major technology companies have also powered gains in the stock market, helping boost some Americans’ wealth.
Despite Thursday’s worse-than-expected report, it’s only the second decline over the past 10 months. January’s Arctic chill also reversed course later in the month in some parts of the country and it’s possible that retail spending could come roaring back in February.
“This weakness typically reverses quickly as weather returns to normal and people catch up on spending plans delayed by the cold and snow,” Bill Adams, chief economist at Comerica Bank, said in a note Thursday.
“The Fed is likely to look through one month’s weak retail sales report, especially since there is an obvious explanation from a clearly temporary issue,” he said.
While there aren’t any glaring signs of a US recession for now, economists widely expect the economy to run at a slower pace in the coming months.
This story is developing and will be updated.
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