Retail Sales Soft In January

Retail sales not only proved very soft in January, but a sharp downward revision to December looks certain to pull down what had been outstanding strength for consumer spending in fourth-quarter GDP. Retail sales fell 0.3 percent in January compared to Econoday's low estimate for no change. December is revised down 4 tenths to unchanged with November, adding insult to injury, also revised down, 1 tenth lower to what is still an outstanding gain of 0.8 percent.

All three months show declines for the leading component which is motor vehicles, falling a very sharp 1.3 percent in January. The weakness here no doubt is the result of replacement demand following the hurricane season which pulled sales forward. Building materials are also weak, down 2.4 percent and in this case possibly reflecting January's unusually severe weather. But however bad the weather was it didn't help nonstore retailers, a component that is dominated by e-commerce and which proved dead flat in January with December's initial surge of 1.2 percent revised down to a much more moderate looking 0.5 percent.

Clothing sales, which had been very soft, rose 1.2 percent in the month, echoing this morning's consumer price report where apparel prices posted a sudden jump. Restaurant sales, which had been strong, were unchanged while furniture sales wobbled for a second month, down 0.4 percent.

The downward revision to December turns what had been a solid holiday shopping season into a so-so season. Control group sales, which are a direct input into GDP, did rise a very strong 1.2 percent in November but are now down 0.2 percent for December with January limping in at no change. After today's report, the consumer sector gets a one-notch downgrade from strong to solid.

Recent History Of This Indicator:
Unit auto sales proved very weak which is expected to hold down January's retail sales gain to a moderate 0.3 percent. When excluding autos, however, sales are expected to show a seventh month of solid strength, at a consensus gain of 0.5 percent. When excluding autos and also gasoline, where higher prices are a positive for the month, sales are expected to move back down to a 0.3 percent gain. When also excluding food services and building materials, control group sales are also expected to come in at a 0.3 percent gain.