US retail sales dropped sharply last month, falling 0.9% from the previous month, according to the Commerce Department. The decline was largely due to cold weather, which kept Americans indoors and reduced sales at car dealers and most other stores. This marks a bigger drop than economists expected and the largest decline in a year.
The average temperature in January was the lowest since 1988, with devastating fires in Los Angeles also potentially impacting spending. Despite this, data does not show that consumers rushed to buy goods ahead of President Trump’s proposed tariffs, as some analysts had predicted.
However, sales were revised higher for December, and many consumers may have simply cut back after splurging during the holiday season. The decline in retail sales provides reassurance for the Federal Reserve that the economy is not overheating.
While the economy still expands, the growth rate is expected to slow down in the first three months of this year, growing at a 2.3% annual rate in last year’s final quarter. Sales plummeted at auto dealers and furniture stores, while online retail saw a 1.9% decline. General merchandise stores and restaurants saw sales rise.
The slowdown may be due to fading consumer confidence, reflected in recent surveys by the Conference Board and University of Michigan. However, hiring and wage growth remain steady, suggesting the economy is still expanding. The unemployment rate has fallen for the second straight month to a low 4%.
Inflation did increase last month, with grocery costs rising due to soaring egg prices. Rising costs at the grocery store are exacting a toll on Americans. Retail chains that have struggled are being forced to cut costs and close underperforming locations.
The environment for all retailers is becoming more perilous as Trump steps up tariff threats, which could lead to higher prices. The owner of Quiksilver and Billabong filed for bankruptcy protection, while another company plans to shutter stores. Retail executives warn that the tariffs will raise prices for consumers and erode household spending power.
Source: https://apnews.com/article/retail-sales-consumer-economy-shopping-53a08a284799497a6eaf79e95a047b0e