Retail sales came in as expected in February, up just 0.1 percent. However, January’s number was revised up to 0.6 percent from 0.4 percent, providing encouragement for solid spending growth in Q1.
Retail Sales Revisions to January Set the Stage for the Quarter
Although retail sales were as expected in February, up 0.1 percent, January’s retail sales were revised higher, from 0.4 percent to 0.6 percent. Excluding automobile sales, retail sales were up a better-than-expected 0.2 percent. Furthermore, as was the case with the overall retail sales number, the January retail sales measure excluding automobile sales was revised up from an increase of 0.8 percent to 1.2 percent. Motor vehicles and parts dealer sales were down 0.2 percent during the month while furniture and home furnishing stores’ sales were up 0.7 percent. Meanwhile, electronics and appliance store sales were down 2.8 percent after increasing 1.1 percent in the first month of the year.
On the other hand, building material and garden equipment sales were up a healthy 1.8 percent after increasing 1.2 percent in January, showing that the housing market remained strong in the first two months of the year. Furthermore, some of the weakness can also be traced back to a very weak report from gasoline station sales, which dropped 0.6 percent, perhaps due to a decline in gasoline prices during the month after a 2.1 percent increase in January. Food and beverage store sales were flat in the month after inching up 0.4 percent in January while food service and drinking place sales were down 0.1 percent after a very strong 1.7 percent increase the previous month.
Other weak performers were clothing and accessories store sales, down 0.5 percent, sporting goods, hobby, book and music store sales, down 0.4 percent and general merchandise stores’ sales, down 0.2 percent. However, all these sectors saw a very strong performance in January so the takeback in February is not much of a surprise. Finally, nonstore retailer sales were up 1.2 percent following a 0.5 percent increase in January. Overall, the retail report for February was relatively weak, especially when comparing it to the upwardly revised January numbers. Furthermore, our expectation is that we may get an upward revision for the February number that will help restore confidence in consumer demand during the first quarter of the year.
Retail Sales Control Group Weak in February
The retail sales control group index, which is used to calculate GDP, was very weak in February, up only 0.1 percent, especially considering that this increase is in nominal terms and inflation has been increasing lately. However, the strong upward revision to this index in January, to 0.8 percent from 0.4 percent, indicates that there may be an upward revision to personal consumption expenditures (PCE) for January. Still, the February report is weak but consumer demand remains a driver of U.S. economic activity.
