Retail sales tumbled more than expected in January as a result of colder than expected winter weather and the sharp decline in gasoline prices.
Advanced Monthly sales for retail and food services declined 0.8%, the U.S. Department of Commerce reported Thursday, much lower than the 0.4% revised increase for December 2023.
Retail sales were depressed by the sharp decline in gasoline prices, by winter weather which kept people from going to shop and by the continuing increase of entertainment expenditures that are not tracked by the indicator.
Retail sales reports are not adjusted for inflation, which makes the decline in gasoline prices even larger than it first appears.
The decline however may not be a sign that consumers are retrenching.
“This month happened to be weak on a year over year basis, but it was weak only because this month last year was super strong, but when you offset for all that nonsense, generally speaking people are going out and having fun at the same rate as they did last month and the month before that.” said Andrew Zatlin, economist and founder of Southbay Research.
In addition to gasoline prices, automobile sales were down in January compared to December and largely dragged down the overall amount.
The extremely cold winter conditions clearly depressed the building materials and garden category as well.
In the post covid-19 era, consumer spending has shifted into an experiential spending trend. Experiential spending is when a consumer chooses to purchase an experience rather than a physical good.
In the current retail spending metric there is only one category that measures this, the food services and drinking number. Largely unaccounted for are concerts, sporting events, travel, lodging, etc.
“This number [retail sales report number] is not a good proxy for consumer spending, it looks at things that were sold at a cash register.” said Zatlin.
In the 2024 Super Bowl, the average ticket sold for $8,600, according to StubHub. Additionally the average concert ticket for the Taylor Swift Eras Tour sold for $1088.56, according to CNBC.
However some economists say that this decline is the beginning of a pullback by consumers.
“I think people are overestimating the strength in the labor market,” said Robert Stein deputy chief economist at First Trust Portfolios L.P. “yes jobs are still growing but if you look at the total hours worked in the private sector, they are up only slightly over the past several months, so the amount of purchasing power is not up as much as people would think.”
In January the unemployment rate remained at 3.7% and total nonfarm payroll employment rose by 353,000.
However, the average workweek for all employees on private nonfarm payrolls decreased by 0.2 hours in January and is down by 0.5 hours over the year, according to the Bureau of Labor statistics.
As the year progresses consumer spending will slow down, as the covid related savings from 2020 and 2021 starts to run out.
