US retail sales dropped 0.9% in January, the biggest decline in nearly two years, likely due to harsh winter weather and wildfires. This marks a reversal of the previous four months of steady gains. However, economists note that the drop may not reflect a significant change in consumer spending habits.
The Commerce Department reported that core retail sales, excluding automobiles, gasoline, and building materials, fell 0.8% last month after an upwardly revised 0.7% increase in December. Motor vehicle output dropped 5.2%, while sporting goods, hobby, musical instrument, and bookstore sales plummeted 4.6%. Online store sales also declined.
Despite the drop in retail sales, economists say that consumer spending remains robust due to labor market resilience and elevated wage growth. Household wealth is at record highs, driven by high house prices, but the stock market has experienced some losses.
The Federal Reserve left its benchmark interest rate unchanged in January, indicating that it will not cut rates soon. The Fed’s decision was influenced by President Donald Trump’s administration policies, including broad tariffs on imports.
Experts warn that consumer sentiment is deteriorating due to rising prices and confusion over tariffs. However, they caution that the drop in retail sales may be temporary and expect a rebound in the coming months if the economy remains strong.
Source: https://www.reuters.com/markets/us/us-retail-sales-fall-sharply-january-2025-02-14