US retail sales plunge in January as temperatures drop post-holiday season

US retail sales dropped sharply last month, in part because cold weather kept more Americans indoors, denting sales at car dealers and most other stores.

Retail sales dropped 0.9 per cent in January from the previous month, the Commerce Department said, after two months of healthy gains. It was a much bigger drop than economists expected and the biggest decline since last January.

The average temperature in January was the lowest since 1988, according to Pantheon Macroeconomics, and was particularly disruptive in the South. Devastating fires in Los Angeles may have also impacted spending.

Sales plummeted 2.8 per cent last month at auto dealers and slumped at furniture stores, home and garden centres. Even the usually strong online retail sector saw a 1.9 per cent decline. Sales rose at general merchandise stores, a category that includes big retailers like Walmart and Target, and at restaurants and bars.

 

In addition to cold weather, the decline could reflect falling consumer confidence as reflected in recent surveys by the Conference Board and University of Michigan. Still, hiring and wage growth have been steady, suggesting the economy is still expanding. Last week the government reported that the unemployment rate fell for the second straight month to a low 4 per cent.

Yet inflation also ticked higher last month, underscoring its persistence despite the Federal Reserve's efforts to cool prices through higher interest rates. The cost of groceries jumped in January from the previous month, pushed higher by soaring egg prices. Rising costs could be exacting a toll on shoppers.

President Donald Trump is also stepping up tariff threats, which could raise prices further. Trump said Thursday he would soon impose reciprocal tariffs on countries that levy large duties on US goods exports. Trump has already added 10 per cent import taxes on goods from China, and has said he will place 25 per cent tariffs on all steel and aluminum imports.