Robert Besser
20 Feb 2025, 10:34 GMT+10
WASHINGTON, D.C.: Retail sales in the U.S. fell by the most in nearly two years in January, likely due to cold weather, wildfires, and fewer available cars. This suggests economic growth slowed at the start of the year.
However, the Commerce Department said the drop followed four months of substantial increases, meaning it may not be a sign that consumer spending is weakening overall. Also, December's sales were revised upward, making the January decline seem less severe.
Economists say seasonal changes at the start of the year make it hard to get a clear picture. They still believe the Federal Reserve will wait until later in the year to cut interest rates. Some policies, like import tariffs introduced under former President Trump, have also raised concerns about the economy.
Retail sales fell 0.9 percent in January, the most significant drop since March 2023, after a 0.7 percent rise in December. Economists had expected only a small 0.1 percent dip. Compared to January last year, sales were still up by 4.2 percent.
Extreme weather affected shopping, with snowstorms hitting much of the country and wildfires damaging areas in Los Angeles.
Auto sales saw the most significant drop, falling 2.8 percent after a rise in December. Some economists think bad weather kept people away from dealerships, and car shortages may also have played a role. Other categories, such as sporting goods, books, online shopping, and clothing, also saw sales fall.
However, spending at restaurants and bars, which economists see as a sign of household financial health, rose by 0.9 percent. Higher gas prices also increased sales at service stations.
Even with this decline, consumer spending remains strong because of a solid job market and high wages. The Federal Reserve Bank of Atlanta lowered its economic growth estimate for the first quarter to 2.3 percent from 2.9 percent, but experts say the economy remains stable.
"The underlying strength of the economy remains largely unchanged," said Tuan Nguyen, U.S. economist at RSM US. "If that strength persists, we should expect sales to rebound in the coming months."
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