Low gas prices drag down US retail sales in February
U.S. retail sales slipped last month, pulled down by sharply lower gas prices, and Americans spent much less in January than previously estimated. The figures suggest that consumers remain cautious about spending despite steady hiring.
Retail sales fell 0.1 percent in February, the Commerce Department said Tuesday. Excluding the volatile gas and auto categories, sales rose 0.3 percent. Overall sales were revised sharply lower in January, from a 0.2 percent gain to a drop of 0.4 percent.
Americans' reluctance to open their wallets could hold back growth in the first three months of this year. Economists had hoped that solid hiring and lower gas prices would entice consumers to spend more, yet Americans seem to be pocketing much of the savings from cheaper gas.
The weak data could make it more likely that the Federal Reserve will hold off on raising the short-term interest rate it controls. Most economists have reduced their forecasts for rate hikes this year from four to two. Fed policymakers are meeting Tuesday and Wednesday.
"Today's report is decidedly negative for both the economy and the probability of a near-term rate hike from the Fed," said Bricklin Dwyer, an economist at BNP Paribas.
The retail report provides the first indication each month of Americans' spending, which drives 70 percent of the economy. Yet retail sales account for only about one-third of all spending, with services such as haircuts and Internet access making up the other two-thirds.
Americans are spending more on services such as health care, education and mobile data, so overall purchases may rise faster than the retail data suggests.
Sales were generally weak across the board: Auto dealers, electronics and appliance stores, grocery stores and department stores all reported lower sales. Gas station sales plunged 4.4 percent.
Americans cut back in a category that includes catalog and online sales, which slipped 0.2 percent. That was its worst showing in 13 months.
Shoppers did spend more in some areas: Sales at home supply, clothing, and sporting goods stores all rose. And people are still eating out. Sales at restaurants and bars jumped 1 percent.
Healthy consumer spending is a key component of growth this year. It is expected to offset drags from slower growth overseas and a strong dollar, which are cutting into exports and corporate profits.
As a result, economists and policy makers will be paying close attention to retail sales data and other measures of Americans' willingness to spend.
Other reports in the past few weeks have suggested that Americans are opening their wallets and pocketbooks. In January, total consumer spending rose by the most in eight months. Incomes rose by the most since June.
Gas prices, meanwhile, fell 27 cents in mid-February to an average of $1.70 a gallon nationwide. Since then, they have rebounded by 24 cents to $1.94, according to AAA.
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