By Barbara Marcolini
After a weak holiday season, retail sales moved downwards again in the first two months of 2016, despite the signs of improvement in the economy.
Retail sales fell 0.1 percent in February from the previous month, but the biggest worry were the numbers for January. An original gain of 0.2 percent was revised for a 0.4 percent decrease, indicating that consumers remain cautious despite the recent good economic news.
“That was disappointing,” said David Sloan, senior economist at 4Cast Inc. “We had thought consumers were making a strong start, but this revision goes against that idea.”
With the revision, retail sales have fallen for three consecutive months.
“Consumption rebounded slower than the original data suggested, creating a weaker sequence,” said Michael Gapen, Chief U.S, economist at Barclays Capital Inc.
The biggest drop in February occurred, again, at gasoline stations. Falling oil prices caused a 4.4 percent change drop on gas receipts from the previous month. Gasoline sales have plummeted 15.6 percent from a year ago.
“When the price went down, we thought the volume would go up, but that didn’t happen,” said Tariq Mahmood, owner of a gas station in Queens, New York. “The volume we’re selling now, with a gallon for $1.85, is the same from one year ago, when the gallon was $3.”
Last week, gas prices inched up 10 cents — which could be good news at least for gas stations.
Tariq Mahmood, owner of a gas station in Queens, New York, saw his sales fall for almost 50 percent over the last year (Photo: Barbara Marcolini)
Up until now, savings from cheaper gasoline didn’t go into other sectors of the economy. For example: furniture stores sales slipped 0.5 percent, department stores dropped 0.4 percent and grocery stores fell 0.3 percent.
“Consumers seem reluctant in spending that extra disposable income from low oil prices,” said Sloan.
Although most economists agree that the savings from cheaper gasoline should be boosting other sectors of the economy, Federal Reserve President Janet Yellen said Wednesday that it is difficult to draw a direct relationship. Yellen said there are many factors influencing consumer spending.
“The average household in the United States with oil prices, where they are now, is probably benefiting around $1,000 a year,” said Yellen during a press conference. “There may be a linkage you would expect from reduced amounts that people pay at the pump to other spending like eating out and other things. But the aggregate data is not as strong as it, and spending is not as strong as it could be.”
In this week’s meeting, the Fed didn’t raise interest rates and said they may not change it in the near future, in a sign of wary about the economy.
Even those who should benefit from lower gas prices haven’t seen much to celebrate. Alexandre Aragão, who works driving tourists around New York, says the savings from cheaper gas were only enough to balance the lower demand in his business.
“I work mostly with Brazilian tourists, and there have been way less Brazilians coming to New York in the past months,” he said. “With the lower prices, I spend almost half of what I used to spend one year ago, but I’ve been having less tourists as well.”
The best performance on last month’s index was the sector of building material, gardening equipment and supplies dealers, which grew by 1.6 percent from January. The sector saw an increase of 12.2 percent from February 2015, in a demonstration that the good numbers for housing starts can also boost retail.
“It’s hard to find anything that is better than expected, but I would say we’re getting good numbers from residential construction,” said Hugh Johnson, Chairman Chief Economist at Hugh Johnson Advisors.
Home Depot, the world’s largest home improvement chain, expects its sales to grow up to 6.0 percent in 2016.
Overall, economists agree that first quarters are traditionally weaker than the rest of the year. On Wednesday, the Fed reduced its GDP projection of growth from 2.4 to 2.2 percent in 2016, still pulled by consumer spending.