Financial News: U.S. Retail Sales Slump Much More Than Expected

U.S. Retail Sales Slump Much More Than Expected As Auto Sales Plunge

(RTTNews) - Partly reflecting a slump by auto sales, the Commerce Department released a report on Friday showing retail sales in the U.S. fell by much more than expected in the month of January.

The report said retail sales slid by 0.9 percent in January after climbing by an upwardly revised 0.7 percent in December.

Economists had expected retail sales to edge down by 0.1 percent compared to the 0.4 percent increase originally reported for the previous month.

"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. "We anticipate a healthy rebound this month as weather conditions have normalized, and consumers resume a solid pace of spending."

She added, ""That said, given the strong momentum for consumer spending has softened and even assuming a healthy rebound in February, consumer spending for the quarter looks to be running at half the ebullient 4.2% pace recorded in Q4. As such, real GDP growth could slow to below 2% in Q1."

The much bigger than expected decrease by retail sales partly reflected the sharp pullback by sales by motor vehicle and parts dealers, which tumbled by 2.8 percent in January after advancing by 0.9 percent in December.

However, excluding the plunge by auto sales, retail sales still declined by 0.4 percent in January after climbing by an upwardly revised 0.7 percent in December.

The pullback surprised economists, who had expected ex-auto sales to rise by 0.3 percent compared to the 0.4 percent growth originally reported for the previous month.

The unexpected decrease by ex-auto sales in January partly reflected a 4.6 percent nosedive by sales by sporting goods, hobby, musical instrument and book stores, which spiked by 3.2 percent in December.

The report also showed notable decreases in sales by non-store retailers, furniture and home furnishings stores, building material and supplies dealers and clothing and accessories stores.

Meanwhile, increases in sales by gas station, food services and drinking places and department stores helped limit the downside.

The report said core retail sales, which exclude automobiles, gasoline, building materials and food services, slid by 0.8 percent in January, reversing a 0.8 percent increase in December.

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