U.S. retail sales slipped last month, pulled down by sharply lower gas prices, and Americans spent much less in January than previously estimated.
The Associated Press reports the figures suggest that consumers remain cautious about spending despite steady hiring. Retail sales fell 0.1% in February, the Commerce Department announced this morning. Excluding the volatile gas and auto categories, sales rose 0.3%. Overall sales were revised sharply lower in January, from a 0.2% gain to a drop of 0.4%.
Americans’ reluctance to open their wallets could hold back growth in the first three months of this year. Economists had hoped that solid hiring and lower gas prices would entice consumers to spend more, yet Americans seem to be pocketing much of the savings from cheaper gas. The weak data could make it more likely that the Federal Reserve will hold off on raising the short-term interest rate it controls. Most economists have reduced their forecasts for rate hikes this year from four to two. Fed policymakers are meeting today and Wednesday.
“Today’s report is decidedly negative for both the economy and the probability of a near-term rate hike from the Fed,” says Bricklin Dwyer, an economist at BNP Paribas.
Sales were generally weak across the board: Auto dealers, electronics and appliance stores, grocery stores and department stores all reported lower sales. Gas station sales plunged 4.4%. Americans even cut back on online shopping, a rare occurrence. A category that includes catalog and online sales slipped 0.2%, its worst showing in 13 months.
Shoppers did spend more in some areas: Sales at home supply, clothing, and sporting goods stores all rose. And people are still eating out. Sales at restaurants and bars jumped 1%. Healthy consumer spending is a key component of growth this year. It is expected to offset drags from slower growth overseas and a strong dollar, which are cutting into exports and corporate profits.
