Retail sales offer worries over growth
Consumers held onto their windfall gains in February, confounding economists who had forecast rebounding store sales. Nine of 13 categories saw sales slip last month, although a snap-back for fuel costs, up by 14-cents per gallon to $2.24 per gallon on average according to the AAA, saw gasoline sales improve. Sales made online also jumped (see second chart), but otherwise an already dour report was further compounded by a downward revision to January store sales that deprived it of its previously recorded advance.
The real difficulty with the analysis here is that consumers don’t have much excuse not to go out and spend, other than aversion to cold and snowy conditions. In addition, the magnitude of improvement in the labor market has been sufficient to recalibrate investors’ attitude towards the onset of monetary tightening. Weakness in consumer spending could be seen at the Fed as a sign of reticence with monetary tightening looming. Sales fell by 0.6% last month, bucking an expected rebound of 0.3%. Motor vehicles and parts dealers saw sales slide by 2.5% for the biggest decline since January 2014.
Meanwhile, building materials dropped by 2.3% for the largest slide since May 2012. Throw in gains for food, beverages and gasoline sales and the control measure used in GDP calculations was unchanged on the month, last rising in November. That’s not too pretty a picture for growth considering the 70% weighting carried by consumer spending in growth calculations.
Chart shows sales of building materials and autos tumbled in February