US retail sales fall in February; January revised higher
US retail sales fell in February as purchases of motor vehicle purchases and other goods slumped, payback after the prior month’s outsized increase, but consumer spending continued to show underlying strength.
The Commerce Department said on Wednesday (Mar 15) that retail sales dropped 0.4 per cent last month. Data for January was revised higher to show retail sales rising 3.2 per cent instead of 3.0 per cent as previously reported. Economists polled by Reuters had forecast sales would fall 0.3 per cent, with estimates ranging from a 1.0 per cent decline to a 0.5 per cent increase.
Retail sales are mostly goods and are not adjusted for inflation.
Consumers remain resilient despite higher borrowing costs as the Federal Reserve fights inflation. The US central bank has raised its benchmark overnight interest rate by 450 basis points since last March from the near-zero level to the current 4.50 per cent-4.75 per cent range.
With 1.9 job openings for every unemployed person in January, the tight labour market is generating higher wages. Consumers still have a huge amount of savings accumulated during the coronavirus pandemic.
According to Bank of America Securities, an analysis of the bank’s card data showed that services spending significantly outperformed goods spending in February. While this suggests the rotation of spending back services helped to undercut retail sales last month, it should support overall consumer spending.
Excluding automobiles, gasoline, building materials and food services, retail sales rose 0.5 per cent last month. These so-called core retail sales increased 2.3 per cent in January, revised up from the previously reported 1.7 per cent.
Core retail sales correspond most closely with the consumer spending component of gross domestic product.
Consumer spending, which accounts for more than two-thirds of the U.S. economy, slowed in the fourth quarter, helping to restrict GDP growth to a 2.7 per cent annualised rate. Growth estimates for the first quarter are currently as high as a 2.6 per cent pace. REUTERS
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