Retail Sales Disappoint in January, Raising Recession Concerns
New data released Friday indicates that retail sales underperformed expectations in the first month of 2025. Headline retail sales declined by 0.9% in January, surpassing the 0.2% drop predicted by economists (Bloomberg data). This marks the sharpest month-over-month decline in retail sales since January 2024.
December's retail sales were revised upward to 0.7%, from the previously reported 0.4% increase (Census Bureau data). RSM chief economist Joe Brusuelas attributed the disappointing January results to seasonal factors and adverse weather conditions.
The control group in Thursday's report, excluding volatile categories and influencing GDP calculations, fell by 0.8%, against economists' projections of a 0.3% rise. Excluding auto and gas, January sales decreased by 0.5%, also below the consensus estimate of a 0.3% increase.
The decline was notably driven by a 4.6% drop in sporting goods and hobby sales, while sales at motor vehicle and parts dealers declined by 2.8%. "Weak February and March data could indicate a negative GDP print for the quarter," warned Jefferies US economist Thomas Simons.
The retail sales data concludes a week of significant economic releases. Earlier inflation readings for January showed higher-than-expected price increases, but economists identified positive implications for markets and the Federal Reserve.
Core PCE, excluding food and energy components, is projected to ease to 2.6% in January, down from 2.8% in December. As of Friday morning, markets assign less than a 50% probability of the Fed cutting interest rates before its July meeting (CME FedWatch tool).