Retail Sales Decline Exceeds Expectations in January 2025

Newly released data indicates a significant decline in retail sales for the first month of 2025, surpassing economists' predictions.

Key Retail Sales Metrics:

* Headline retail sales fell by 0.9% in January, surpassing the anticipated 0.2% decline.
* This marks the most substantial monthly decline since January 2024.
* December retail sales were revised upward to 0.7% from the previous 0.4% growth.
* The control group, excluding volatile categories and factored into quarterly GDP readings, experienced a 0.8% decline (against expected 0.3% growth).
* Excluding autos and gas, January sales fell 0.5% (below the 0.3% growth consensus).

Factors Contributing to Decline:

* A decline in sporting goods and hobby sales led the reduction by 4.6%.
* Motor vehicle and parts dealers saw a 2.8% sales drop.

Implications for Economic Outlook:

* "Weak February and March data could result in negative GDP growth for the quarter," notes Thomas Simons, Jefferies US economist.
* "While this is not our base scenario, a sub-2% growth rate appears realistic."

Inflation and Interest Rate Outlook:

* Despite January inflation readings exceeding expectations, economists observed positive indicators for markets and the Federal Reserve.
* "Core" PCE inflation, excluding food and energy, is projected to slow to 2.6% in January from 2.8% in December.
* Markets currently predict less than a 50% probability of interest rate cuts by the Fed before July.