Retail sales fell more in January than Wall Street expected, raising questions about whether America's resilient consumer could be losing momentum.
Retail sales fell 0.8% In January compared to the previous month, according to the Census Bureau. Economists had expected spending to fall 0.2%, according to Bloomberg data. December retail sales previously posted a surprise 0.6% rise, but this was revised down to 0.4% in Thursday's release.
January's monthly decline was the largest since March 2023.
The nation's chief economist Kathy Bostjancic noted that seasonal adjustments and poor weather in January would likely slow sales later in the month. But economists have been waiting for the general trend of a slowdown in consumer behavior.
“We expect consumers to hold back on spending this year after reducing pandemic-related savings, driving savings rates well below pre-pandemic levels and increasing their reliance on credit,” Bostjancic wrote in a note to the customers.
January sales, excluding cars and gasoline, fell 0.5%, compared to estimates for a 0.2% increase.
Nine of the 13 categories highlighted in the press release saw declines compared to the previous month. Building materials and gardening equipment led the declines, down 4.1%, while other store sales fell 3%.
Meanwhile, sales at furniture and home furnishing stores led the way, up 1.5% month-on-month.
Shoppers carry bags of purchased goods at the King of Prussia Mall, the largest retail shopping area in the United States, in King of Prussia, Pennsylvania, U.S., December 8, 2018. Portal/Mark Makela (Portal / Portal)
The January report was expected to be closely watched by investors looking for signs of a “soft landing” for the U.S. economy, with inflation cooling to the Fed Reserve's target rate of 2% without there is an extreme downturn in economic activity.
It was the second economic data point released this week that questioned the prospects of this scenario. On Tuesday, the latest consumer price index (CPI) report showed prices rose 3.1% in January, more than the 2.9% economists had expected, raising questions about whether inflation is on a steady path below the Fed's 2% target.
The story goes on
In an interview with Yahoo Finance, However, Allianz's chief economic adviser, Mohamed El-Erian, warned against reading too far into a printed publication noted that retail sales may be more worrisome than inflation because they reflect a weakening economy.
“US exceptionalism is based on the ability to continue to grow, and growth is driven by the household sector and retail sales,” El-Erian said. “That’s why we have outperformed other economies. That's why our stock market has performed so well. It’s the ability to grow.”
Another economist pointed out that Tuesday's data, on the other hand, could ease lingering concerns about a red-hot economy that could trigger a spike in inflation.
“Overall, real consumption appears to have declined in January, and even allowing for a rebound in February and March, growth will slow sharply in the first quarter,” wrote Andrew Hunter, deputy chief U.S. economist at Capital Economics, in a Customer Notice . “The upshot is that Fed officials may no longer have to worry much about the possibility that continued economic resilience could spur inflation again.”
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
Click here for the latest stock market news and in-depth analysis, including stock-moving events
Read the latest financial and business news from Yahoo Finance