You are here: Home » Reuters » News
Business Standard

US retail sales fall 0.1% in Feb; underlying producer prices rise solidly

Slower consumer spending supports expectations of moderate economic growth in the first quarter

Reuters  |  Washington 

US retail sales
A woman shops at Brookfield Place in Lower Manhattan in New York City (Photo: Reuters)

US fell for a third straight month in February as households cut back on purchases of motor vehicles and other big-ticket items, pointing to a slowdown in economic growth in the first quarter.

Other data on Wednesday showed underlying prices increasing solidly in February amid strong gains in the cost of services such as hotel accommodation, and hospital inpatient care. Inflation is steadily rising and the Federal Reserve is expected to raise interest rates next week.

The Commerce Department said slipped 0.1 per cent last month. January data was revised to show sales dipping 0.1 per cent instead of falling 0.3 per cent as previously reported. It was the first time since April 2012 that have declined for three straight months.

Economists polled by had forecast rising 0.3 per cent in February. in February increased 4.0 per cent from a year ago.

Excluding automobiles, gasoline, building materials and services, edged up 0.1 per cent last month after being unchanged in January. These correspond most closely with the consumer spending component of

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, appears to have slowed at the start of the year after accelerating at a 3.8 per cent annualised rate in the fourth quarter.

The dollar slipped against a basket of currencies after the data, while prices for U.S. Treasuries were little moved. U.S. stock index futures slightly extended gains.

Slower consumer spending supports expectations of moderate economic growth in the first quarter. GDP growth estimates for the January-March quarter are around a 2 per cent annualised rate.

The economy grew at a 2.5 per cent pace in the fourth quarter. But revisions to December data on construction spending, factory orders and wholesale inventories have suggested the fourth-quarter growth estimate could be raised to a 3.0 per cent pace. The government will publish its third estimate for fourth-quarter GDP growth later this month.


Consumer spending, however, remains underpinned by a strong labour market, which is viewed by Fed officials as being near or a little beyond full employment. The economy created 313,000 jobs in February.

Consumer spending could also get a lift from a $1.5 trillion income tax cut package. Auto sales fell 0.9 per cent in February after a similar drop in January. Receipts at service stations declined 1.2 per cent, reflecting lower gasoline prices.

There were also declines in sales at furniture stores, health and personal care stores and and appliance stores. But there were some pockets of strength. Sales at building material stores increased 1.9 per cent last month.

Receipts at clothing stores gained 0.4 per cent and sales at surged 1.0 per cent. Consumers also spent more at restaurants and bars and splurged on sporting goods and hobbies.

In a separate report, the Labor Department said a key measure of underlying price pressures that excludes food, and rose 0.4 per cent last month, matching January's gain.

That boosted the year-on-year increase in the so-called core PPI to 2.7 per cent, the biggest gain since August 2014, from 2.5 per cent in January. The increase in underlying wholesale prices supports views that consumer inflation will pick up this year.

Economists believe that a tightening labour market, weak dollar and fiscal stimulus from the tax cuts and increased government spending will lift inflation toward the Fed's 2 per cent target this year.

The U.S. central bank's preferred inflation measure, the personal consumption expenditures (PCE) price index excluding and energy, has undershot its target since May 2012.

First Published: Wed, March 14 2018. 19:38 IST