WASHINGTON – Retail sales in the United States saw a significant decline last month, influenced largely by unseasonably cold weather that kept many consumers indoors, negatively impacting sales particularly for car dealerships and various retail stores.
According to the Commerce Department, retail sales dipped by 0.9% in January compared to the previous month, marking a notable decrease after two months of positive growth. This decline was steeper than economists anticipated and represents the largest fall in retail sales witnessed within a year.
Statistics indicate that January experienced the coldest average temperatures since 1988, particularly affecting more temperate regions in the South. Additional factors, such as devastating wildfires in Los Angeles, may have also contributed to lower spending levels.
Interestingly, the data did not reflect a surge in purchasing as people tried to get ahead of potential tariffs proposed by then-President Donald Trump, which some analysts had forecasted. However, it was noted that revisions showed higher sales figures for December. Many consumers may simply have opted to hold back on spending after the holiday spending spree.
The drop in retail sales possibly offers the Federal Reserve some comfort, especially following robust inflation reports in January, suggesting that the economy might not be overheating. Furthermore, this downturn indicates that while the economy continues to grow, the pace may be slower in the first quarter of this year, particularly after a 2.3% annual growth rate recorded in the previous year’s final quarter.
Sales plummeted 2.8% at automobile dealerships, and there were declines in sales at furniture stores and home improvement centers. Even online retail, which typically performs well, recorded a 1.9% decrease. On a brighter note, sales did rise at general merchandise stores that include major retailers like Walmart and Target, as well as at dining establishments.
In addition to the unfavorable weather, the decline in retail sales may indicate a decrease in consumer confidence, as observed in recent surveys conducted by the Conference Board and the University of Michigan. However, consistent hiring and wage growth signal ongoing economic expansion, with the latest government report revealing that the unemployment rate dropped for the second consecutive month to a record low of 4%.
On the inflation front, prices increased last month, notwithstanding the Federal Reserve’s efforts to mitigate rising costs through heightened interest rates. Notably, grocery prices surged in January, driven primarily by skyrocketing egg prices, making it more challenging for many Americans to manage their budgets effectively.
As retail chains continue to struggle, many have begun reducing costs and closing underperforming outlets. One significant instance is Joann, which filed for Chapter 11 bankruptcy for the second time within a year and recently announced plans to close around 500 of its U.S. locations, more than half of its stores.
Another company facing challenges is Authentic Brands Group, the parent of surf and skate-inspired brands like Quiksilver, Billabong, and Volcom, which also filed for bankruptcy protection last week, with intentions to close several stores.
The retail landscape may become increasingly precarious as the previous administration escalates its tariff threats, potentially leading to price hikes on consumer goods. In a recent statement, Trump announced plans to implement “reciprocal” tariffs on nations that impose heavy duties on U.S. exports, having already introduced a 10% tax on imports from China and threatening to raise tariffs to 25% on steel and aluminum.
David French, executive vice president of the National Retail Federation, cautioned that these import taxes could ultimately increase costs for consumers. He emphasized, “While we support the president’s efforts to reduce trade barriers, the scale of this initiative could be massively disruptive to our supply chains and lead to higher prices for American families.”
Retail executives express concerns regarding the unpredictability of tariff policies, making strategic planning difficult. Kim Tobman, CEO of Bouqs, an online floral retailer, noted that while her company sources most of its vases from China, the 10% tariff has not had as severe an impact as anticipated. She is currently exploring alternatives in countries like Vietnam and Indonesia for sourcing vases, stating, “At this moment, we feel we can absorb the increase.”
Tobman also recounted the instability resulting from Trump’s fluctuating tariff strategies during an earlier conflict with Colombia, a key flower exporter to the U.S., which was briefly threatened with a 25% tariff after failing to accept deported migrants. Fortunately, after negotiations, Colombia complied, and the tariff never came to fruition.
US retail sales fell sharply in January as colder temperatures followed a lively holiday period.
