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Retail Sales Increased 0.3% in January

American shoppers increased their spending in January, signalling a key engine of the economy remained on steady footing.

Retail sales, a measure of purchases at stores, at restaurants and online, increased a seasonally adjusted 0.3% in January from a month earlier, the Commerce Department said Friday. That was in line with the expectation of economists surveyed by The Wall Street Journal.

Consumer spending is the main driver of the U.S. economy, accounting for more than two-thirds of economic output. While data on retail sales can be volatile from month to month, the broader trend shows that consumer spending remains robust: from a year earlier, retail sales increased 4.4% in January.

Higher retail sales last month will feed into the broader pace of economic growth for the first quarter. Still, the report showed spending was uneven across the board. Sales at furniture, general merchandise and building material stores all rose strongly, likely reflecting mild winter weather in much of the U.S. Auto sales, which make up about 20% of total retail sales, increased 0.2% from December.

Meantime gasoline sales dropped by 0.5%, the most since August, amid lower gas prices last month. Unlike other reports produced by the government, retail sales aren’t adjusted for price changes. Sales at electronic and healthcare stores posted sharp declines, and clothing sales dropped 3.1% from December, the largest month-over-month decrease in that category since March 2009.

Still, Friday’s report provides reassurance that Americans remain undeterred from spending and treating themselves. Sales at restaurants and bars rose 1.2% for the second month in a row.

Factors driving U.S. consumer spending also remain strong. Unemployment was a low 3.6% in January, and average hourly earnings posted a 3.1% year-over-year gain, suggesting households have money to spend.

“The economy is on stable ground,” payroll-processing company Automatic Data Processing Inc.’s Chief Executive Carlos Rodriguez said during an earnings call on Jan. 29. Wage growth is “still at robust levels and should drive continued consumer spending and continued consumer confidence,” he said.

Some retailers are circumspect about the prospects for 2020. Macy’s Chief Executive Jeff Gennette said last week that while the economy is still healthy, he is mindful “that it’s not going to be as strong as it was in the two previous years.”

On Jan. 15, the U.S. and China signed a trade deal in which the U.S. agreed to cut tariffs on $120 billion in Chinese goods by half, to 7.5%, and to forgo other planned tariffs. But the deal leaves in place U.S. tariffs on about $370 billion in Chinese goods, or about three-quarters of Chinese imports to the U.S.

January also saw the first confirmed cases of coronavirus in the U.S., and in late January the U.S. imposed entry restrictions on foreign nationals and quarantines on Americans returning from the Chinese province at the center of the outbreak. While the impact of coronavirus on the U.S. so far has been minimal, a worsening of the outbreak could dent consumer confidence down the line and has already disrupted some U.S. retailers’ operations overseas.

Ralph Lauren Corp. temporarily shuttered around two-thirds of its mainland China stores over the past week due to coronavirus. The fashion house said Thursday it would take a hit in its current quarter of $55 million to $70 million in sales, and $35 million to $45 million in operating income in Asia, due to the outbreak.

“The company also expects broader impact across its businesses in China and parts of Asia due to significantly reduced travel and retail traffic,” Ralph Lauren said.
Source: Dow Jones

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