Retail sales stabilized in January but didn’t rebound from the surprisingly low December numbers, signalling the economy is off to a sluggish start in the first quarter.  

Overall sales rose a seasonally adjusted 0.2% in January, pushed up by purchases made online, in building-materials stores and at restaurants.

The control group, which excludes volatile categories such as building materials and gas station sales and is considered a cleaner barometer of consumer demand, rose by 1.1% after a 2.3% drop in the previous month.

December’s abysmally low retail figures had surprised many economists, but Monday’s report showed a further decline in the previous months numbers. Data was revised to show a 1.6% decline instead of an originally reported 1.2%. Online retail sales numbers were revised sharply from a 3.9% decline to an unexplained 5% drop.

While, the uptick in January sales doesn’t compensate for the December plunge, the control-group numbers do show consumer-spending gaining momentum. Economists said the lower than expected rise in sales can be partially attributed to the shutdown in January.

The January retail sales report was delayed by a 35-day partial shutdown of the federal government that ended on Jan. 25.

The shutdown which weakened overall consumer and business confidence impacted 800,000 federal employees.

“Government workers and households were severely stressed,” said Robert Dye, chief economist at Comerica Bank. “Federal employees and their families missed two paychecks, they had to cut spending down to barebones.”

The modest rise in the January retail sales not only hinted at caution taken by federal employees but also the conservative spending behaviour of consumers amidst the shutdown.

“We had a disappointing snapback,” said Stan Shipley, senior economist, Evercore ISI. “Sales are positive excluding gas and auto, but they are still down from where they were in November.”

Receipts at auto dealerships tumbled down by 2.4% in January, the largest drop since January 2014 and gasoline filling receipts were down by 2% due to erratic energy prices.

Out of all sectors, sporting goods saw the biggest increase in sales at 4.8%. The manager at Modell’s Sporting Goods at Times Square, Mc Martin Ofori says that the store usually witnesses a rush during the December-January period.  

“A lot of people prep before the sporting season, in the past few months we’ve seen people buying equipment and merchandise.” said Ofori.

Sales at non-store retailers had the best gain in more than a year. Online sales grew by 2.6% in January, after reviving from a sharp drop in December.

Volatile data revisions in a time of store closures are not surprising, says Dye.

Charlotte Russe at 34th St. closing down. The company plans to close all of its stores over the next two months.
Photographer: Karishma Vanjani

Charlotte Russe at 34th St. closing down. The company plans to close all of its stores over the next two months. Photo by Karishma Vanjani

The rise of ecommerce has put pressure on brick-and-mortar stores with prominent retailers filing for bankruptcy in recent months.

Sahiba Anand, manager at bazaar perfumes, a perfume retail outlet on 40th St. says foot traffic in her store is going down.

“I have been working here for the past three years,” said Anand. “Sales in the past couple of months have been nowhere close to what they used to be like in the November-December period in 2017.”

The modest gain in consumer spending has added itself to the list of things contributing to the slowing economy. The big economy engine is already stuttered on trade tensions, waning effects of tax cuts and sharp moderation in the pace of job growth.

“We believe because of the gains in disposable income, consumers will regain momentum later in the year.” said David H Sloan, Senior Economist at Continuum Economics. “However, the early signals in February are not particularly promising so we would not suggest this rebound will be immediate”

For the February retail report, the delay in tax refunds will be a key factor to watch out.

Most delays are for those claiming earned income tax credit and/or the child-care credit, as per Ryan Sweet, head of monetary policy research at Moody’s Analytics.