U.S. retail sales rebound but not enough to jolt slowing economy

WASHINGTON (Reuters) – U.S. retail sales rose modestly in January after a December drop that was even bigger than initially estimated, but the restoration was not seen robust enough to alter the course of a U.S. economy that was dropping momentum in early 2019.

People store at Macy’s Department retailer in New York City, U.S., March 11, 2019. REUTERS/Brendan McDermid

The report from the Commerce Department on Monday was welcome information for the economy after a raft of weak December knowledge, in addition to a pointy moderation within the tempo of job development in February. Still, January’s improve in retail sales recouped solely a fraction of December’s plunge, leaving expectations for a slowdown in shopper spending within the first quarter intact.

“Sales managed only a tepid reversal in January from December’s deep freeze,” mentioned Douglas Porter, chief economist at BMO Capital Markets in Toronto. “While we expect some further comeback in the next couple months, the big story is that the economy’s big engine is cooling.”

Retail sales rose zero.2 p.c as elevated purchases of constructing supplies and extra discretionary spending offset the most important decline in motorized vehicle sales in 5 years. Data for December was revised to present sales tumbling 1.6 p.c as an alternative of lowering 1.2 p.c as beforehand reported.

The drop in December was the most important since September 2009 when the economy was rising from recession. Economists polled by Reuters had forecast retail sales to be unchanged in January. Sales in January elevated 2.three p.c from a 12 months in the past.

The January retail sales report was delayed by a 35-day partial shutdown of the federal authorities that ended on Jan. 25. February’s retail sales report, which was scheduled for publication on Thursday, will likely be launched on April 1.

Excluding vehicles, gasoline, constructing supplies and meals companies, retail sales rebounded 1.1 p.c in January after a downwardly revised 2.three p.c plunge in December, the most important drop since 2000. These so-called core retail sales correspond most carefully with the buyer spending part of gross home product.

They had been beforehand reported to have decreased 1.7 p.c in December. Consumer spending accounts for greater than two-thirds of U.S. financial exercise.

Coming on the heels of a deterioration within the commerce deficit in December and weak building spending, the downward revision to the core retail sales instructed gross home product development slowed greater than the federal government initially estimated within the fourth quarter.

The authorities reported final month that the economy grew at a 2.6 p.c annualized charge within the October-December quarter after increasing at a brisk three.four p.c within the third quarter.

Economists now count on GDP development will likely be lowered to a 2.1 p.c tempo when the federal government publishes its revision later this month.


The weaker December core retail sales additionally set shopper spending on a weaker development path within the first three months of the 12 months, main the Atlanta Federal Reserve to reduce its January-March quarter GDP development forecast by three-tenths of share level to a zero.2 p.c charge.

Goldman Sachs lowered its first-quarter development estimate by four-tenths of a share level to a zero.5 p.c charge.

Consumer spending, which elevated at a 2.eight p.c charge within the fourth quarter, is seen rising modestly within the first three months of the 12 months because the stimulus from a $1.5 trillion tax reduce bundle fades. In addition, 2018 tax refunds have on common been smaller than within the earlier years.

But spending stays supported by robust wage development and better shopper confidence. The authorities reported on Friday annual wage development elevated three.four p.c in February, the most important acquire since April 2009, from three.1 p.c in January.

Slowing financial development helps the Federal Reserve’s “patient” strategy towards additional rate of interest hikes this 12 months.

Fed Chairman Jerome Powell reiterated the U.S. central financial institution’s stance on Sunday in a wide-ranging interview with CBS’s 60 Minutes information present. Powell mentioned the Fed did “not feel any hurry” to change the extent of rates of interest once more..

“Weak first-quarter GDP will be another factor that keeps the Fed ‘patient’ at the March meeting and beyond,” mentioned Andrew Hollenhorst, an economist at Citigroup in New York.

The greenback was little modified in opposition to a basket of currencies, whereas U.S. Treasury costs fell. Stocks on Wall Street rose after 5 straight classes of declines, but a pointy drop in Boeing Co shares after a second lethal crash of certainly one of its planes in simply 5 months capped positive factors on the blue-chip Dow.

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In January, on-line and mail-order retail sales elevated 2.6 p.c, the most important acquire since December 2017. Sales at constructing materials shops elevated three.three p.c, essentially the most since September 2017. But receipts at auto dealerships tumbled 2.four p.c in January, the most important drop since January 2014, after gaining zero.three p.c within the prior month.

Receipts at service stations fell 2.zero p.c reflecting cheaper gasoline costs. There had been additionally declines in sales at clothes and furnishings shops, in addition to electronics and equipment outlets.

Discretionary spending rose in January, with sales at eating places and bars advancing zero.7 p.c and purchases at pastime, musical instrument and e-book shops leaping four.eight p.c, the most important improve since January 2013. Sales at meals and beverage shops gained by essentially the most since April 2016.

Reporting by Lucia Mutikani; Editing by Andrea Ricci

Our Standards:The Thomson Reuters Trust Principles.

Source link reuters.com

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