U.S. Retail Sales Tumbled 0.8% in January

Consumer spending fell sharply in January, the Commerce Department reported Thursday. Advance retail sales declined 0.8% for the month following a downwardly revised 0.4% gain in December.

Sales at building materials and garden stores were especially weak, sliding 4.1%. Miscellaneous store sales fell 3% and motor vehicle parts and retailers saw a 1.7% decrease. Gas station sales also declined 1.7% as prices at the pump dropped during the month. On the upside, restaurants and bars reported an increase of 0.7%.

Consumer strength has been at the center of a U.S. growth picture that has proven far more durable than most policymakers and economists had expected. Spending accelerated by 2.8% in the fourth quarter of 2023, finishing out a year in which gross domestic product rose 2.5% despite widespread predictions for a recession.

However, worries linger that stubbornly high inflation could take its toll and jeopardize prospects going forward.

“It’s a weak report, but not a fundamental shift in consumer spending,” said Robert Frick, corporate economist for Navy Federal Credit Union. “December was high due to holiday shopping, and January saw drops in those spending categories, plus frigid weather plus an unfavorable seasonal adjustment. Consumer spending likely won’t be great this year, but with real wage gains and increasing employment it should be plenty to help keep the economy expanding.”