Retail sales fall 0.8% in January: ‘Spending splurge nears end’

Retail sales in January fell by the most in almost a year, raising concerns that shoppers are becoming increasingly overwhelmed by the weight of persistently high inflation and record credit card debt. It’s increasing.

The Commerce Department’s Census Bureau reported Thursday that retail sales fell by a worse-than-expected 0.8% last month after the December figure was revised downward to 0.4% from 0.6%.

Economists had expected retail sales (mainly merchandise sales not adjusted for inflation) to fall by just 0.1%.

The unexpected monthly decline was the worst since March last year, with retail sales falling just 0.6% year-on-year, the worst since coronavirus lockdowns began in May 2020.

Jeffrey Roach, chief economist at Charlotte-based LPL Financial, told the Post on Thursday: “This report suggests that consumers are likely becoming more price-conscious, and perhaps this is the end of splurges. This is the first sign that we are getting closer.”

Some economists had warned against reading too much into the sharp decline in retail sales.

“While the weather has weighed on consumer spending this month, we expect consumer spending to recover quickly,” said Bill Adams, chief economist at Comerica Bank.

Yet Americans whose bank accounts bulged with coronavirus economic stimulus checks still owe a total of $1.13 trillion on credit cards, with an average balance of $6,360 per user. The numbers have risen sharply, and all of these are at historically high levels, so there is a possibility that their use will be suspended.

According to the Commerce Department, retail sales fell 0.8% in January, down from December’s strong performance (up 0.4% on an adjusted basis). Getty Images

Paying off these balances may be difficult. The average annual interest rate on most cards has soared to nearly 23% as the Federal Reserve continues to keep interest rates at 20-year highs in an effort to curb inflation.

The worrying data for retail sales follows Tuesday’s CPI reading of a lower-than-expected 3.1%.

Rising inflation remains above the Federal Reserve’s 2% target level, as public dissatisfaction with continued high prices has become a crucial issue in President Joe Biden’s re-election bid.

“Real consumption appears to have fallen in January, and growth in the first quarter is likely to be sharp, even accounting for a recovery in February and March,” said Andrew Hunter, deputy chief U.S. economist at Capital Economics. will slow,” Andrew Hunter, deputy chief U.S. economist at Capital Economics, said in a report. Retail sales data.

“As a result, Fed officials may no longer need to worry about the economy’s continued resilience and the possibility of a resurgence in inflation.”

Unadjusted retail sales typically decline in January. Seasonal factors were less supportive in January than in previous years, resulting in a significant decline in adjusted sales last month.

So-called core retail sales, which exclude autos, gasoline, building materials and food services, fell 0.4% in January. The core retail sales measure most closely corresponds to the consumer spending component of GDP.

Wall Street investors had been hoping the Fed would cut interest rates soon after disappointing retail sales data.

The 0.8% drop is the largest decline in retail spending in nearly a year. X/@GRDecter

“Investors were expecting modest growth in core retail sales, but instead they were down month-over-month,” said Brett Kenwell, investment analyst at eToro.

“This complicates matters for investors looking for clarity on the Fed’s first rate cut.”

The Dow Jones Industrial Average rose more than 200 points, or 0.52%, in midday trading, while the S&P 500 index rose 16.5 points, or 0.33%.

In a separate report released Thursday by the Labor Department, claims for state unemployment benefits fell by a seasonally adjusted 8,000 to 212,000 for the week ending Feb. 10.

Despite a recent spate of high-profile job cuts, primarily in the technology and media sectors, application numbers have fluctuated between low levels. Economists had expected 220,000 claims in the past week.

Still, headwinds for shoppers remain strong. Total household debt increased by $212 billion in the fourth quarter of 2023 to $17.5 trillion, according to the latest Quarterly Household Debt and Credit Report released by the New York Fed.

Delinquency rates have risen from historic lows near the end of 2022, and households entered the pandemic with strong balance sheets that have since been shored up by trillions of dollars in government aid.

The New York Fed said 3.1% of outstanding debt is in some form of delinquency, an increase of one-tenth of a percentage point from the third quarter.

Overall delinquency rates decreased by 1.6 percentage points compared to the final quarter of 2019, before the pandemic hit.

Economists said unfavorable weather was likely a key factor in the drop in retail spending. Seventy Four –

The government’s monthly retail sales report provides only a portion of consumer spending. Many services such as healthcare, travel, and hotel accommodations are not included.

In the coming weeks, major retailers such as Walmart and Macy’s are expected to report their financial results for the fourth quarter of their fiscal year, which includes the important holiday period.

with post wire