Retail Sales Unexpectedly Decline in January 2025
New data released on Friday indicates that retail sales experienced a steeper-than-anticipated decline in January 2025. According to Bloomberg data, headline retail sales plunged by 0.9% in January, exceeding the 0.2% decrease forecasted by economists. This marks the most significant month-over-month contraction in retail sales since January 2024.
Revised December retail sales figures show an increase of 0.7%, adjusted from the previous reading of 0.4%, as reported by the Census Bureau. "The traditional post-holiday lull and a severe winter freeze combined to hinder overall retail sales," said RSM chief economist Joe Brusuelas in an X article.
The control group in Thursday's release, excluding volatile categories and contributing to quarterly gross domestic product (GDP) readings, contracted by 0.8%. Economists had predicted a 0.3% increase. Sales excluding autos and gasoline fell by 0.5% in January, also falling short of consensus estimates for a 0.3% gain. Sporting goods and hobby sales saw a significant 4.6% decline, while motor vehicle and parts dealers experienced a 2.8% drop.
Friday's retail sales data concludes a week of significant economic data releases. Earlier in the week, two inflation metrics for January revealed higher-than-expected price increases, but economists identified positive indicators for markets and the Federal Reserve within the details.
Analysts anticipate a deceleration in price increases during January when examining categories from both the Consumer Price Index (CPI) and Producer Price Index (PPI) that contribute to the Fed's preferred inflation gauge, the Personal Consumption Expenditures (PCE) index. "Core" PCE, excluding food and energy, is projected to reach 2.6% in January, down from 2.8% in December.
As of Friday morning, markets assign a probability below 50% for the Federal Reserve to cut interest rates before its July meeting, according to the CME FedWatch tool.