US Consumer Spending Cools... January Retail Sales Down 0.8% (Update)

U.S. retail sales declined last month at a faster pace than expected. This is analyzed to be due to the end of the winter shopping season and continued severe cold weather across the country, leading to reduced consumption.

원본보기 아이콘

According to the U.S. Department of Commerce on the 15th (local time), January retail sales totaled $700.3 billion, down 0.8% from the previous month. This was the largest decline in 10 months since March last year, with consumption slowing more sharply than the Wall Street Journal (WSJ) forecast of -0.3%. Although retail sales typically decrease in January due to seasonal factors, the decline this year was larger.

The retail sales indicator is considered a pillar accounting for two-thirds of the U.S. real economy and is used to assess the overall economic trend. The decline in retail sales last month suggests a risk of worsening household spending, which has supported the robust U.S. economic growth so far.

Retail sales growth for November and December last year was also revised downward. The growth rate for November was adjusted from 0.3% to 0%, and for December from 0.6% to 0.4%. This is seen as a signal that the economy, including consumer spending, may not be as strong as previously reported. Economists at Goldman Sachs estimated that the U.S. GDP growth rate for the fourth quarter of last year will be 3.2%, 0.1 percentage points lower than the previous Commerce Department figure of 3.3%. The GDP forecast for the first quarter of this year was also lowered from 2.9% to 2.5%.

Among the 13 retail sales categories, 9 showed a decline. Consumption in building materials and garden supplies fell by 4.1%, and in automobiles and auto parts by 1.7%.

U.S. industrial production also showed signs of slowing. Industrial production in January decreased by 0.1% compared to December last year, and manufacturing production, which accounts for the largest share of industrial output, fell by 0.5% month-over-month.

The market is closely watching the January retail sales data to gauge the future interest rate path of the Federal Reserve (Fed). Although last month’s Consumer Price Index (CPI) rose more than expected, consumption is rapidly slowing, creating mixed signals among key indicators. As a result, market expectations that the possibility of an interest rate cut has not yet been extinguished are gradually reviving.

However, since the retail sales decline lasted only one month, it seems difficult to conclude that the U.S. economy is cooling down. Additionally, employment data released on the same day remained robust. According to the U.S. Department of Labor, initial jobless claims for the week of February 4?10 fell by 8,000 from the previous week to 212,000, below the expert forecast of 219,000.

Michael Pearce, a U.S. economist at Oxford Economics, said, "Consumer spending is expected to increase at a solid pace this year," adding, "Real disposable income is rising at a decent rate, and with increased wealth from rising home prices and stock markets, household savings are not expected to surge sharply."

© The Asia Business Daily(www.asiae.co.kr). All rights reserved.