US retail sales increase moderately in February; January revised up sharply

Shoppers carry bags of merchandise purchased at King of Prussia Mall, the largest retail space in the United States, in King of Prussia, Pennsylvania, U.S., December 8, 2018. REUTERS/Mark Makela/File Photo

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  • Retail sales rise 0.3% in February
  • January sales increase revised to 4.9% from 3.8%
  • Core Retail Sales Fall 1.2%; January revised up to 6.7% gain

WASHINGTON, March 16 (Reuters) – U.S. retail sales edged up in February as more expensive gasoline and food forced households to cut spending on other goods like furniture, electronics and appliances, which could dampen economic growth this quarter.

Wednesday’s Commerce Department report, however, showed the January sales rebound was much stronger than initially expected. Record fuel and food prices are hitting low-income households the hardest.

Overall, consumers are cushioned by the massive savings accumulated during the COVID-19 pandemic. Labor shortages with near-record job openings are driving up wages and allowing Americans to take extra shifts to boost their earnings.

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“Despite cooling off from the January madness, U.S. consumers appear reasonably well positioned to continue spending, buoyed by recent massive job gains and elevated household savings,” said economist Sal Guatieri. principal at BMO Capital Markets in Toronto.

“This assumes, of course, that there is no further blow to fuel and food costs, confidence and financial conditions resulting from the Russian-Ukrainian war.”

Retail sales rose 0.3% last month. January data has been revised up to show sales jumped 4.9% instead of 3.8% as previously reported. Economists polled by Reuters had forecast retail sales growth to slow to 0.4%, with estimates ranging from a decline as low as 0.7% to an increase as high as 1.7%.

Retail sales were up 17.6% from a year ago. The moderate monthly gain in retail sales preceded an expected Federal Reserve interest rate hike later Wednesday, the first in just over three years.

Retail sales are primarily made up of goods and are not adjusted for inflation. Last month, sales at car dealerships rose 0.8%. The rise likely reflects higher prices amid a shortage, as automakers reported lower unit sales last month. Auto sales accelerated 6.9% in January.

Gas station revenues jumped 5.3%. Gasoline prices jumped 24 cents to an average of $3.49 a gallon in February from January, according to data from the US Energy Information Administration. They have since hit a record high above $4 a gallon after Russia invaded Ukraine on Feb. 24. The war has also pushed up wheat prices, which could keep food prices high.

US stocks opened higher on signs of progress in peace talks between Ukraine and Russia. The dollar fell against a basket of currencies. US Treasury yields rose.


Furniture store sales fell 1.0%. Consumers also reduced spending at health and personal care stores, as sales fell 1.8%. Sales at non-store retailers fell 3.7%. Receipts at electronics and appliance stores fell 0.6%.

But consumers spent more on clothes than on sporting goods, hobbies, musical instruments and books. Restaurant and bar receipts rebounded 2.5%. Restaurants and bars is the only service category in the retail sales report.

Excluding automobiles, gasoline, building materials and food services, retail sales fell 1.2% in February. Data for January has been revised up to show these so-called core retail sales rebounded 6.7% instead of 4.8% as previously reported.

Core retail sales correspond most closely to the consumer spending component of gross domestic product. An upward revision to core retail sales in January offset February’s decline, which could leave consumer spending on a moderate growth path in the first quarter.

The Russian-Ukrainian war, which is also expected to further strain supply chains, prompted Goldman Sachs economists last week to cut their estimate for first-quarter gross domestic product growth to an annualized rate of 0, 5% versus 1.0%. The economy grew at a robust 7.0% in the fourth quarter.

A recession is not expected this year, as consumers are sitting on about $2.5 trillion in excess savings. Job postings at the end of January were near a record high of 11.3 million.

“The U.S. economy should still experience continued growth, albeit at a slower pace than seemed possible at the start of the year,” said Bill Adams, chief economist at Comerica Bank in Toledo, Ohio.

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Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci

Our standards: The Thomson Reuters Trust Principles.

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