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United States Retail February 2018

United States: Retail sales remain soft in February

In spite of solid hiring dynamics and consumer sentiment at a near two-decade high, retail sales disappointed for a third consecutive month in February. Retail sales fell 0.1% in month-on-month terms, well below market expectations of a 0.4% increase for the month. The figure was in line with the revised 0.1% decline recorded in January, one of the report’s only silver linings—sales had originally been reported to have declined 0.3%. Although some of the report’s weakness likely accounted for tax refund delays, it however indicates that consumer spending remains soft mid-way through the first quarter.

The headline drop in sales was led by a hefty decline in purchases at gasoline stores, which were down 1.2% in sequential terms following a 1.9% increase in January. On a similarly bleak note, furniture store sales were down 0.8% while those at health and personal care centers were down 0.4%. Less surprisingly, sales at vehicle dealers dropped for a fourth consecutive month on continued payback after a severe hurricane season front-loaded demand. Excluding autos and gas, retail sales rose 0.3% in February, which was in line with market expectations and followed a 0.1% decline in January.

At the other end of the spectrum, spending on building materials was up a sizeable 1.9% in February, which reversed a 1.7% decline in the previous month. Online retailers also saw sales increase 1.0% in February, contrasting a 0.9% drop in January. Discretionary spending at restaurants also rose 0.2% in February, a tad above January’s 0.1% increase.

In annual terms, growth in retail sales edged up marginally to 4.0% in February from an upwardly revised 3.9% increase recorded in January (previously reported: +3.6% year-on-year). Annual average retail sales growth was down a notch to 4.4% in February, below 4.5% in January.

Although consumers seem to have had a weak start to the year, the late disbursement of income tax refunds is expected to shore up sales in March and offset some of the softness observed in January and February. Nonetheless, any improvement is unlikely to be enough to prevent a significant deceleration in private consumption in the first quarter.

United States Private Consumption Forecast

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