US retail sales fell 0.4 per cent in January; cold weather slowed auto and clothes shopping
WASHINGTON - Cold weather across much of the nation contributed to a drop in retail sales in January. Americans spent less on autos and clothes and at restaurants â€” a decline that suggests that momentum from consumer spending at the end of 2013 has tailed off.
The Commerce Department said Thursday that retail sales fell a seasonally adjusted 0.4 per cent last month. That marked the second straight decline after a 0.1 per cent drop in December.
Freezing cold and heavy snowfall raked much of the United States, cutting into store traffic and weighing on post-holiday sales. Major store chains have reduced their profit outlooks, including Wal-Mart Stores Inc., the largest retailer.
"Horrible all round," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
The tepid showing contributed to a lower opening on Wall Street. The Dow Jones industrial average shed more than 80 points in early trading before paring its losses.
Prospects for economic growth could remain lacklustre for February, too, after snowstorms blanketed almost a third of the nation Thursday. The storm overlaps this week with a government survey that's being used to calculate the February jobs report.
"It's quite possible that we have to brace ourselves for another soft jobs report," said Jennifer Lee, senior economist at BMO Capital Markets. "That's due to the snow."
Economic slowdowns caused by winter weather usually lead to stronger growth once temperatures rise again. But the repeated battering of snowstorms this winter means that waiters, limousine drivers and other hourly workers might never recoup their lost wages later this year, said Diane Swonk, chief economist at Mesirow Financial.
"You disrupted incomes for some people permanently," Swonk said.
She estimates that economic growth during the first three months of this year will be "well below" a 2 per cent annual rate â€” a steep drop-off from the 3.2 per cent rate in the final quarter of 2013.
The retail sales report is the first look at last month's consumer spending, which accounts for about 70 per cent of all economic activity. Many economists had predicted that stronger consumer spending this year would cause growth to accelerate.
But along with falling retail sales, several economic reports indicate that growth may have slowed.
Factories received fewer orders last month. The number of Americans who have signed contracts to buy homes has plummeted to its lowest level in more than two years.
And the past two monthly job reports were sluggish. Only 113,000 workers were added in January. That's slightly better than the 75,000 jobs for December. But combined, it's about half the pace of average monthly job gains over the past two years.
There are also signs that the momentum at the end of last year was weaker than initially thought.
Retail sales for December were revised downward in Thursday's report. What was initially a 0.2 per cent gain turned into a 0.1 per cent loss. Some economists suggested that growth during the October-December quarter would be revised down slightly from its initial 3.2 per cent annualized increase.
Auto sales fell 2.1 per cent in January. Excluding volatile spending on autos, gas and building supplies, retail sales were flat compared with December.
Americans spent more at gas stations because of rising prices. Their purchases of building materials also increased, possibly a sign of preparation for snowstorms.
But purchases of clothing and furniture tumbled. Department store sales continued to decline after a weak holiday shopping season.
As a result, the pace of retail sales growth over the past 12 months has slowed. Purchases have risen 2.6 per cent compared with January 2013.
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