February retail sales slump for second straight month
U.S. consumer spending sputtered in February, with sales at retailers and food services establishments dropping 0.1 percent over the month, according to a report released Tuesday by the Census Bureau.
The underwhelming totals, in conjunction with downward revisions to prior months' data, don't bode particularly well for domestic economic growth in the first quarter of the year. Retail sales have now fallen for two consecutive months, as January's retail growth was revised from a positive 0.2 percent to -0.4 percent.
Motor vehicle sales fell 0.2 percent in February and another 0.2 percent in January – a rough start to the year after auto sales climbed to an all-time high in 2015. Spending at furniture and home furnishing outfits, electronics and appliance shops and general merchandise stores were all negative in both months, while receipts at food and beverage outlets and miscellaneous retailers notably dropped off in February.
But the months' declines are due in large part to falling gas prices that didn't bottom out until mid-February. Gas station receipts were down 4.4 percent over the month and 15.6 percent over the year in February. In January, such sales were down 3.3 percent from December and 8 percent from where they sat 12 months prior. Sales excluding gas and motor vehicles were actually up 0.3 percent last month.
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"Overall retail sales were down, as expected given the big drop in gasoline prices over the month. There was also a big downward revision to sales in January," Stuart Hoffman, a senior vice president and chief economist at The PNC Financial Services Group, wrote in a research note Tuesday. "But sales excluding autos and gasoline posted a solid gain, have increased in nine of the past 10 months, and are up more than 4 percent over the past year."
Oil prices have shown healthy growth since the middle of February, however, which is likely to help bolster March's numbers. And February's sales were still up 3.1 percent from Feb. 2015, with sales at food services and drinking places growing 6.4 percent on the year – suggesting Americans are increasingly going out and spending at bars and restaurants, effectively helping support local businesses.
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Additionally, spending has been relatively robust outside of basic retail items included in Tuesday's report. The Census Bureau's service industry tracker was up 1.5 percent month over month and 2.1 percent year over year in the fourth quarter of 2015. That metric tracks what shoppers spend on newspapers, utilities, entertainment and recreation – categories that aren't profiled in the retail sales report.
And across the board, spending looked pretty good in the final three months of 2015. Spending on professional, scientific and technical services (like accounting, architectural services and legal services) was up 2.7 percent in the fourth quarter, while health care and social assistance spending (which includes daycare expenses and charges related to medical and dental appointments) climbed 2.4 percent.
What's more, expenses related to performing arts, spectator sports and related industries jumped 7.7 percent in the fourth quarter and were up 12.9 percent over the year. Amusement, gambling and recreation industries saw receipts balloon 3.3 percent over the year, with expenses at amusement parks and arcades climbing 10.3 percent.
It's worth noting that the fourth quarter is generally considered to be the best window for consumer spending on services, while the first quarter of the new year is typically the worst. So these metrics are likely to tick down once March wraps up and data are released for the first three months of 2016.
Still, though, it's clear that consumers have been out shopping in at least moderate fashion in the last few months – and that's a notable accomplishment, considering the volatile effects January and February had on financial and international markets. Going forward, analysts generally aren't worried about long-term economic growth as long as consumer spending shows signs of strength. They'll expect more positive retail sales reports than this one going forward, but the month's data weren't a complete wash.
"The fundamentals for consumer spending are solid: job growth of better than 200,000 per month, rising wages, a huge drop in energy prices that has freed up cash to spend on other things, low interest rates and gradually easing access to credit," Hoffman said. "Consumer spending is leading overall economic growth, and that will remain the case throughout 2016 and into 2017."
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