US consumers pulled back on spending last month, with retail sales dropping 0.9% in January from the prior month, according to data released by the Commerce Department. This is the first decline since August and comes despite expectations of a smaller drop.
The downturn was felt across multiple categories, with specialty stores and auto dealers seeing significant declines of 4.6% and 3%, respectively. However, spending at restaurants, bars, and department stores remained positive.
Inflation has been a major factor in the slowdown, as it continues to impact consumer behavior despite being lower than its 40-year highs last summer. The Federal Reserve’s hesitation to cut interest rates further is also partly due to inflation concerns.
The government’s retail figures are adjusted for seasonality, but harsh weather and unusual events may have influenced spending patterns. Analysts say there’s no cause for alarm, citing a solid rolling average of consumer spending despite the latest decline.
Wall Street remains bullish on keeping interest rates unchanged in March, with the Federal Reserve poised to stand pat at its upcoming meeting. This decision is driven by hotter-than-expected inflation data and a steady job market, which have made it unlikely for the Fed to cut rates again soon.
Source: https://edition.cnn.com/2025/02/14/economy/us-retail-spending-january/index.html