A new report from the U.S. Census Bureau showed that advance estimates of retail and food services sales in February totaled $492.0 billion. That was a 0.1 percent decrease from January’s upward-revised print, the third monthly decline in a row, and significantly worse than the 0.4 percent gain expected. Weaker automobile and gas station sales exacerbated the headline decline but even core retail sales, which exclude these volatile components, rose by just 0.3 percent last month. That was slightly worse than forecast and another signal that consumer spending has cooled during the start of 2018.
Such a development is not too concerning for now following the previous quarter’s 3.8 percent annualized gain in consumption, the fastest pace of growth recorded in over a year. In fact, an uptick in borrowing (credit card utilization) helped fuel 2018’s yearend spike in consumer spending, so it is actually encouraging to see that shoppers are taking a breather. Moreover, personal saving as a percentage of disposable personal income, i.e. “the personal saving rate,” jumped in January to the highest reading since August, suggesting that Americans are taking steps to repair their balance sheets following the holiday shopping season. Weaker consumption, though, also means that GDP growth during Q1 2018 could disappoint earlier estimates, but updated forecasts are still above the post-recession average.
Sources: Econoday, U.S. Census Bureau, Bloomberg, FRBSLPost author: Charles Couch