Washington (AFP) – US retail sales plunged by the most in almost two years last month as cold weather hit the country alongside wildfires in California, data showed Friday, reflecting broad declines while President Donald Trump returned to office. The decreases come as households draw down on savings, grapple with stubborn inflation, and face uncertainty over Trump’s threats of tariffs on goods from major US trading partners.
Retail sales fell 0.9 percent between December and January to $723.9 billion, partly due to slumping auto sales, the Commerce Department said. This was the biggest month-on-month drop since early 2023 and a significantly larger decline than the 0.2 percent fall predicted by economists polled by the Dow Jones Newswires and The Wall Street Journal. Analysts generally expect growth in the world’s biggest economy to cool this year and are closely eyeing the strength of consumption — a key economic driver.
Experts warn that blanket duties, if imposed for a prolonged time, would mean importers face higher costs that could be passed on to consumers. Out of 13 categories logged by the Commerce Department, only four saw month-on-month growth, including sales at gas stations and those at restaurants and bars. Sales at autos and parts dealers in particular dropped by 2.8 percent last month, while those at clothing stores, building material dealers, and furniture shops also slid. Excluding motor vehicles and parts, retail sales still fell 0.4 percent from December to January.
But from a year ago, retail sales in January were 4.2 percent higher, the Commerce Department added.
“The sharp decline in January retail sales was due in large part to the extreme wintery conditions and California wildfires last month,” said Nationwide chief economist Kathy Bostjancic in a note. While she expects a “healthy rebound” in February, she added that “the strong momentum for consumer spending has softened.” Corporate economist Robert Frick of the Navy Federal Credit Union believes that although the drop was dramatic, “there’s no cause for alarm” for now.
Looking ahead, Carl Weinberg and Mary Chen of High Frequency Economics expect the retail report will cause forecasters to lower estimates of US GDP growth. Consumer spending has been a driver of US growth for the last 10 quarters, they said in a note. “Any sign of consumer weakness is not good news for markets, even though expectations of lower interest rates and inflation may help stocks,” Weinberg and Chen added.
© 2024 AFP
