USD: Retail sales fall much more than expected

January’s US retail sales report looks soft, falling 0.8% month-on-month versus the 0.2% drop expected while December's growth rate was revised down to +0.4% MoM from +0.6%. The 'control group', which excludes volatile items such as autos, food service, gasoline and building supplies, has a better correlation with broader consumer spending trends – remember retail sales is only around 45% of total consumer spending – fell 0.4% MoM versus expectations of a 0.2% increase. With inflation coming in on the hot side earlier in the week, this implies consumer spending fell in real terms in January, which would be the first decline since August.

Looking at the details, the only components to post an increase in retail sales were furniture (+1.5%), food (+0.1%), department stores (+0.5%) and eating & drinking out (+0.7%). Autos fell 1.7%, which we had a good handle on due to the fall in volume sales already reported with lower gasoline prices prompted an identical sized fall in that component. Clothing and sporting goods both fell 0.2% with electronics down 0.4% and building materials falling 4.1% MoM. Even non-store (largely internet only stores) saw sales fall 0.8%.