US retail sales dropped by 0.9% in January, the largest decline in nearly two years, due to frigid temperatures, wildfires, and motor vehicle shortages. However, this drop is likely a temporary blip rather than a sign of a larger shift in consumer spending.
The sharp decline was partly offset by an upward revision to December’s sales, which showed a 0.7% increase. Economists also noted that seasonal swings can be difficult to strip out from the data at the turn of the year.
Despite this, economists expect the Federal Reserve to wait until later in the year to cut interest rates again. The Fed left its benchmark overnight interest rate unchanged in January, having reduced it by 100 basis points since September.
Retail sales declined across various categories, including motor vehicles, sporting goods, and online stores. However, food services and drinking places saw a modest increase of 0.9%. Economists attribute this to higher gasoline prices lifting sales at service stations.
Labor market resilience is keeping wage growth elevated and the economic expansion on track, with household wealth at record highs. The stock market has ceded some gains, but economists remain optimistic about sales rebounding in the coming months if the economy’s underlying strength persists.
Source: https://finance.yahoo.com/news/us-retail-sales-fall-sharply-133854954.html