© Reuters. FILE PHOTO: Coronavirus disease (COVID-19) outbreak in New York City
By Lucia Mutikani
WASHINGTON (Reuters) – US retail sales fell more than expected in February in bitter cold weather across the country. A recovery is likely, however, as the government pays out another round of pandemic aid to mostly low and middle income households.
Other data from Tuesday showed that import prices rose sharply last month, driven by rising commodity prices and supporting expectations of higher inflation this year. Federal Reserve officials scheduled to begin a two-day meeting later Tuesday are likely to shake off the general weakness in sales.
"With healthier and warmer days ahead and generous stimulus controls along the way, consumers are ready to shake off the winter chill," said Lydia Boussour, senior US economist at Oxford Economics in New York. "This year we expect that the combination of an improved health situation and generous fiscal incentives will trigger a consumer boom for the history books."
Retail sales fell by a seasonally adjusted 3.0% last month, the trade department said. The January data has been revised to show a 7.6% increase in sales instead of the 5.3% previously reported. Economists polled by Reuters had forecast retail sales to fall 0.5% in February.
Unusually cold weather hit the country in February, and deadly snowstorms hit Texas and other parts of the South region. Last month's decline in sales also reflected the slowing increase in one-time $ 600 checks to households, which were part of the nearly $ 900 billion additional tax incentives approved in late December, as well as late tax refunds.
The decrease was due to motor vehicles. Dealership revenue declined 4.2% after rising 5.0% in January. Sales in clothing stores decreased 2.8%.
Consumers also reduced spending at restaurants and bars, which resulted in a 2.5% drop in revenue. Sales in restaurants and bars were down 17% compared to February 2020. Electronics and homeware stores revenue fell 1.9% and furniture store sales fell 3.8%.
There was also a sharp drop in sales in sporting goods, hobby, musical instrument and bookstores.
Food and beverage retail revenues were unchanged. Sales in building materials stores fell by 3.0%. Online retail sales fell 5.4% after rising 16.8% in January.
US stocks opened lower. The dollar remained stable against a basket of currencies. US Treasury bond prices were higher.
STRONG IMPORT PRICES
Excluding automobiles, gasoline, building materials and food services, retail sales fell 3.5% last month, after rising 8.7% in January. These so-called core retail sales correspond most closely to the consumption component of the gross domestic product. It was previously estimated to have increased 6.0% in January.
Still, last month's decline in retail sales left most of January's earnings untouched, and the decline was likely temporary. President Joe Biden signed his $ 1.9 trillion bailout last week, which will send additional checks of $ 1,400 to households and a government-funded weekly unemployment allowance of 300 through September 6 US dollar will extend.
The expected rebound in retail sales is also being driven by an acceleration in vaccination pace, which should allow broader economic reintegration, even if the rate of decline in new COVID-19 cases has flattened. Households have also accumulated $ 1.8 trillion in excess savings.
Goldman Sachs (NYSE 🙂 economists on Saturday raised their GDP growth estimate for the first quarter from 5.5% to an annual rate of 6%, citing the latest stimulus from the Biden administration. The economy grew 4.1% in the fourth quarter.
Goldman Sachs forecast growth of 7.0% for this year. That would be the fastest growth since 1984, following a 3.5% decline last year, the worst in 74 years.
In a separate report on Tuesday, the Labor Department said import prices rose 1.3% last month after rising 1.4% in January. Economists had forecast import prices without tariffs, which rose by 1.2% in February.
In the twelve months to February, import prices rose 3.0% after rising 1.0% in January. Oil prices have rebounded to pre-pandemic levels on expectations of global economic growth, but the pandemic is disrupting the supply chain and increasing commodity prices.
Inflation is expected to pick up pace this year, driven by massive fiscal stimulus and the reopening of the domestic economy as vaccinations slow the spread of the coronavirus. But overcapacity in the labor market is likely to keep price pressures from spiraling out of control.