U.S. retail sales experienced a significant decline in January, dropping by 0.9% from the previous month according to the Commerce Department.
This decline followed two months of strong sales growth and was more substantial than economists had anticipated, marking the largest decrease in a year.
Driving the news: Cold weather played a significant role in the decline, as harsh winter conditions across the country kept individuals indoors, affecting sales at car dealerships and various retail stores.
- The drop in retail sales was coupled with the lowest average temperature in January since 1988, causing disruptions in the more temperate Southern regions. Additionally, devastating fires in Los Angeles likely impacted consumer spending patterns.
- Contrary to expectations, the data did not indicate a rush among consumers to make purchases in January ahead of President Donald Trump’s proposed tariffs. It is suggested that many individuals reduced spending in January after indulging during the holiday season.
- The decline in retail sales could offer some reassurance to the Federal Reserve, following concerns about high inflation rates in January, revealing the economy’s tempered growth in the first quarter of the year.
Zoom in: Sales across various sectors experienced declines, with auto dealers facing a significant 2.8% drop in sales, while furniture stores and home and garden centers also saw slumps.
- Even online retail sales experienced a notable 1.9% decrease.
- Rising costs of groceries in January contributed to increased inflation, with higher prices particularly impacting items such as eggs. As a result, struggling retail chains are being pressured to reduce costs and shutter underperforming stores.
