Retail Sales Anemic in January, Weekly Jobless Claims Jump
WASHINGTON -- 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 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.
%VIRTUAL-pullquote-Overall, the tone of this report was disappointing as it points to a weak start to spending activity this year...%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.
However, inventory and trade data for December suggest growth could be revised to as low as a 1.7 percent rate.
U.S. financial markets were little moved by the data with attention focused on details of a ceasefire agreement between Russia and Ukraine and a surprise interest rate cut and bond purchasing program by Sweden's central bank.
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.
Still, cheaper gasoline prices and robust employment gains are expected to provide a powerful stimulus to consumer spending and keep the economy on an expansion path, despite sputtering growth in Asia and Europe.
"Should we be worried about the weakness of underlying sales over the past two months? Possibly," said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto.
"But all the conditions are in place for a period of very strong consumption growth. We still expect to see that strength come through in the retail sales data soon."
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, expanded at its quickest pace since 2006 in the fourth quarter and is expected to maintain a brisk pace of growth this year.
A separate report Thursday from the Labor Department showed initial claims for state unemployment benefits rose 25,000 to a seasonally adjusted 304,000 last week, but the underlying trend remained consistent with a strengthening labor market.
Difficulties adjusting the claims data for seasonal variations have caused volatility in recent weeks.
The four-week moving average of claims, seen as a better measure of labor market trends as it irons out week-to-week volatility, fell 3,250 to 289,750 last week.
"The trend [in payrolls growth] is likely still solidly over 200,000 per month, more than strong enough to keep the unemployment rate trending down," said Jim O'Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, New York.
The economy has added more than a million jobs over the past three months, an achievement last seen in 1997. A key measure of labor market slack -- the number of job seekers for every open position -- hit its lowest level since 2007 in December.
In January, core retail sales were held back by the biggest drop in just over a year in furniture and home furnishings sales. There were declines in receipts at clothing retailers as well as at sporting goods stores, where sales recorded their biggest drop since January of last year.
Sales at online retailers and electronic and appliance stores rose last month. Declining gasoline prices undercut sales at service stations, where receipts plunged 9.3 percent, the biggest fall since December 2008.
Weaker service station receipts and a 0.5 percent drop in automobile sales pushed overall retail sales down 0.8 percent last month. It was the second straight monthly decline.
Sales for building materials and garden equipment rose last month, likely boosted by preparations for a blizzard in the Northeast. Receipts at restaurants and bars also increased.