- Retail sales declined by 3.0% month-on-month in February, worse than the median consensus estimate of a 0.5% drop. The good news is that sales in January were revised up to 7.6% from 5.1% in the advanced reading.
- Most categories were in the red in February. The biggest decline was in sporting goods, which fell 7.5%, following an upward revision to 10.3% (previously +8.0%). Non-store retailers and general merchandize stores both declined by 5.4%, but were upwardly revised to 16.8% m/m (from +11.0%) and 10.4% m/m (from +5.5%), respectively. Sales in autos & parts dealers and food services & drinking places dropped by 4.2% and 2.5%, respectively while their January growth was revised up by roughly two percentage points.
- Gas stations continued to grow at 3.6% month-on-month, while food & beverage stores were flat.
- Excluding more volatile components (gas, autos, building materials and food services), retail sales in the “control group” fell by 3.5%, below market expectations for a 0.9% decline. January’s gain was also revised up to 8.7% (from +6.0% in advanced estimate). The control group is used to gauge personal consumption expenditures, the February reading of which is likely to come in soft based on today’s report.
Key Implications
- The decline in February sales was larger than expected, but not too surprising given unseasonably frigid weather that shut down much of the southern part of the country. The pullback comes on the heels of a strong and upwardly revised reading in January.
- Thanks to income support measures, U.S. consumers have financial resources to spend, while sentiment measures point to a growing optimism. The passage of the $1.9 trillion American Rescue Plan will boost future spending. This round of stimulus is coming at a time when cases are declining and lockdowns are being relaxed, which makes it easier to spend. Retail sales are posed to recover in March, supporting first quarter spending growth, which we expect to come in around 4% (annualized).
