Retail sales dip for third straight month in Feb

Washington

US retail sales fell for a third straight month in February as households cut back on purchases of motor vehicles and other big-ticket items, pointing to a slowdown in economic growth in the first quarter.

The Commerce Department said on Wednesday that retail sales slipped 0.1 per cent last month. January data was revised to show sales dipping 0.1 per cent instead of falling 0.3 per cent as previously reported. It was the first time since April 2012 that retail sales have declined for three straight month.

Economists polled by Reuters had forecast retail sales rising 0.3 per cent in February. Retail sales in February increased 4 per cent from a year ago.

Excluding cars, petrol, building materials and food services, retail sales edged up 0.1 per cent last month after being unchanged in January. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product (GDP).

Consumer spending, which accounts for more than two-thirds of US economic activity, appears to have slowed at the start of the year after accelerating at a 3.8 per cent annualised rate in the fourth quarter.

But spending remains underpinned by a strong labour market, which is viewed by Federal Reserve officials as being near or a little beyond full employment. The economy created 313,000 jobs in February.

Consumer spending could also get a lift from a US$1.5 trillion income tax cut package. Slower consumer spending supports expectations of modest economic growth in the first quarter.

GDP growth estimates for the January-March quarter are around a 2 per cent annualised rate.

The economy grew at a 2.5 per cent pace in the fourth quarter. But revisions to December data on construction spending, factory orders and wholesale inventories have suggested the fourth-quarter growth estimate could be raised to a 3 per cent pace.

In February, car sales fell 0.9 per cent after a similar drop in January. Receipts at service stations declined 1.2 per cent, reflecting lower petrol prices. There were also declines in sales at furniture stores, health and personal care stores, and electronics and appliance stores.

But there were some pockets of strength in the report. Sales at building material stores increased 1.9 per cent last month.

Receipts at clothing stores gained 0.4 per cent and sales at online retailers rose 1 per cent. Sales at restaurants and bars rose 0.2 per cent. Receipts at sporting goods and hobby stores jumped 2.2 per cent.

US producer prices meanwhile increased slightly more than expected in February as a rise in the cost of services offset a decline in the price of goods.

The Labor Department said its producer price index for final demand rose 0.2 per cent last month after increasing 0.4 per cent in January.

That lifted the year-on-year increase in the PPI to 2.8 per cent in February from 2.7 per cent in January. Economists polled by Reuters had forecast the PPI gaining 0.1 per cent last month and increasing 2.8 per cent from a year ago.

A key gauge of underlying producer price pressures that excludes food, energy and trade services rose 0.4 per cent last month, matching January's gain. In the 12 months through February, the so-called core PPI increased 2.7 per cent. That was the biggest gain since August 2014, and followed a 2.5 per cent advance in January. REUTERS