US Retail Sales Decline in January, Weighing on Economic Outlook

Summary:

US retail sales unexpectedly declined by 0.9% in January, significantly低于0.2% reduction forecasted by economists. The decline marks the largest month-over-month drop since January 2024.

Drivers of Decline:

* Consumer spending was impacted by traditional post-holiday slowdown and severe winter weather.
* Declines were widespread across various retail categories.
* Sporting goods and hobby sales witnessed a significant 4.6% drop, while sales at motor vehicle dealers decreased by 2.8%.

Excluding Volatile Sectors:

* The control group, excluding categories that influence the gross domestic product (GDP) reading, also declined by 0.8%, against expectations of a 0.3% increase.
* Sales excluding auto and gas fell 0.5%, below consensus estimates of a 0.3% gain.

Implications for Inflation and Interest Rates:

* While retail data points to slower consumer spending, earlier inflation readings suggest prices rose higher than anticipated.
* Economists anticipate a moderate slowdown in core PCE inflation, a key gauge for the Federal Reserve.
* Market expectations currently suggest a less than 50% probability of the Fed cutting interest rates before July.