US Retail Sales Misses Expectations Hints at Softer Economy

U.S. consumer spending barely rose in January as households cut back on purchases of a range of goods, suggesting the economy started the first quarter on a softer note.

The Commerce Department said on Thursday retail sales excluding automobiles, gasoline, building materials and food services edged up 0.1 percent last month after a 0.3 percent drop in December.

The so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.

 
“Overall, the tone of this report was disappointing as it points to a weak start to spending activity this year, despite the significant boost to disposable income from lower gasoline prices,” said Millan Mulraine, deputy chief economist at TD Securities in New York.

Wall Street had expected core retail sales to increase 0.4 percent last month. The soft reading could see economists trim their forecasts for first-quarter GDP growth. The economy grew at a 2.6 percent annual pace in the fourth quarter.

U.S. stock index futures pared gains on the data, while the dollar slipped against a basket of currencies. U.S. Treasury debt prices cut losses.

Despite a 39.5 percent decline in gasoline prices since June, consumer spending has been soft in the past two months. Economists say households are using the extra income to pay down debt and boost savings.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza