Retail sales rose moderately in January, hinting to a slowdown in the economy and a slower growth in consumer spending for 2019.
Sales increased by 0.2 percent in the first month of the year, the Commerce Department said Monday. However, economists were surprised by the lower scale of the recovery after the December report, which showed that consumers had cut down on spending during the holiday season.
“I think it was pretty weak,” said Robert Brusca is Chief Economist of Fact and Opinion Economics. “All the growth rates are weak.”
The January report revised the December’s drop to 1.6 percent which was initially 1.2 percent when the report had come out.
This report was the latest sign that consumer spending could be weakening for a number of reasons. The Federal Reserve raised the interest rates last year along with the banks, which tightened their credit standards as Americans fell behind on their car loan payments. Further, the global economic engine slowing down could also mean more trouble for the economic growth projected for the year according to low.
“The biggest surprise was the failure to recover even half of the drop in December,” said Christopher Low, Chief Economist at FTN Financial.
The volatility of the stock market in December scared consumers and investors but if the volatility continues in the new year then that could also become a reason for the erosion of consumer trust said Troy Ludtka, Economist at Natixis North America LLC.
Higher mortgage rates are making consumers buy lesser houses leading to lower purchases of home appliances and furniture which can further accelerate the declining consumer spending in the economy said Low.
“The weakness ripples out,” said Low. “It certainly suggests that growth will be weaker this year.”
Consumer spending could slow further as the year progresses as tension-filled trade talks with China cast a partial shadow over the economy said Brusca.
Several sectors experienced strong growth in January, including restaurants, booksellers and the building materials sector, which saw the biggest one month increase in their sales since 2013. However, the sector that increased its sales the most from the previous month was the non-store retail sector, mostly e-commerce, which increased by 7.6 percent continuing a long-term shift towards online sales.
However, as the retail industry saw a decline in their sales in the December report followed by marginal increase in January, the effect if this volatility is felt by retailers. Danny Koch, a fourth generation owner of Townshop, a lingerie retail store has been feeling the volatility of the retail marketplace.
“Despite all the craziness we are still seeing people shop,” said Koch. “We are just trying to keep it going.”
Townshop’s business has been doing well despite the turbulent nature of the market. They have only one store in Manhattan for the past hundred years with a loyal customer base that feeds into it.
“The reality is that people still want to come to shop,” said Koch. “And shop in person.”
Not all the sectors of the retail industry showed an increase in sales, especially the motor vehicles and the gasoline sector, which saw a decline signaling to other problems for the economy.
“Retail sales is not telling you a good story,” said Brusca. “This puts people on notice about how weak the economy is.”