By Steve Trader
A low January retail sales number released Thursday by the U.S. Census Bureau indicates that consumer spending is off to a very slow start for this year, with inclement weather likely a factor in the drop off.
While economists predicted that the sales number would be flat, a decrease of 0.4 percent for the last month was much lower than expected. However, when compared to the January sales number from one year ago, Thursday’s indicator shows a 2.6 percent increase in consumer retail purchases.
Products like groceries and personal care items–the core consumer products that people use daily–are always expected to be steady. January saw a low percent increase for food stores, and a decrease in personal care products, two discouraging numbers.
Auto sales for the month of January decreased by 2.1 percent from just one month ago. With autos excluded from the report, the retail sales number would have been flat for the month.
For the most part, harsh winter weather likely kept consumers away from stores in January. While it may have brought a large increase to winter gadget purchases like shovels and snowblowers, the cold weather likely caused a drop in nearly all other product sales.
“Auto sales are very sensitive to weather,” said Kevin Harris, an economist from Informa Global Markets. “People spend a lot of time on the car lot looking around, and it was a bad month to be out on a car lot.”
Along with auto sales, gasoline consumption can play a large role in determining the overall sales number. Fuel spending was up 1.1 percent from December to January, but gas prices also rose by about 10 cents over that same period.
“When the volatile components such as building materials and gasoline are taken out of the report, it’s a total mess,” said Harris. “It was the core components that drove down the sales number, and when those are down that’s really bad.”
Retail sales reports are known to be a volatile indicator of actual economic growth and consumer spending. It often includes revisions to past numbers as more data is collected, as was the case for the December 2013 figure. Originally noted as a 0.2 percent increase from November, December sales were refigured to a negative 0.1 percent.
Still, the data shows that consumers are opening their wallets a little wider than they were just a year ago. Total sales for November of 2013 through January 2014 showed a 3.4 percent spending increase for the same period last year.
But with a lackadaisical holiday spending period, combined with a poor jobs report that indicated a rise in people dropping out of the workforce, it’s hard to find a positive figure to indicate a turnaround in economic growth.
Investors were not deterred by Thursday’s dismal number as the S&P 500 rose. But if the main consumption indicator does not improve soon, it might be cause for concern in the near future.
“It’s something to keep an eye on, but is it something to be overly concerned with at this point in time? Probably not,” said economist David Berson of Nationwide Insurance. “February could be low as well, we may not know until March, but if the numbers haven’t improved by that point then yeah, it might be a problem.”