Large parts of the country have been gripped by freezing
temperatures and snow storms, which have been blamed for weak hiring
over the past two months. Economists, however, are not worried yet
and look for a rebound in the second quarter.
"Today's data unequivocally show that the unusually cold winter
weather is weighing on economic activity. Consumer spending has
literally frozen," said Harm Bandholz, chief economist at UniCredit
Research in New York.
Retail sales fell 0.4 percent last month, led by a tumble in
automobile sales and categories like clothing, furniture stores and
restaurants that depend of foot traffic. Economists had expected
retail sales to hold steady.
Adding to the report's weak tone, December sales were revised to
show a 0.1 percent dip. They had previously been reported to have
increased 0.2 percent.
Investors on Wall Street discounted the weak data, with U.S. stocks
up marginally in morning trade. The dollar fell, while prices for
U.S. government debt rose.
"It's still too early to conclude that the soft patch is a more
ominous sign of a more meaningful slowdown in the economy," said Jim
Baird, chief investment officer at Plante Moran Financial Advisors
in Kalamazoo, Michigan.
DEMAND A BIT COOLER
While the two straight months of declining sales most likely
reflected frigid temperatures, there were also signs of general
weakness creeping in as online sales also fell.
Stripping out automobiles, gasoline, building materials and food
services, so-called core sales fell 0.3 percent. Core sales for
December were revised to only a 0.3 percent rise from a previously
reported 0.7 percent advance. November's core sales figure was also
Core sales correspond most closely with the consumer spending
component of gross domestic product.
The downward revisions to November and December core sales suggest
that fourth-quarter consumer spending and economic growth were not
as strong as initially thought.
In its first estimate of fourth-quarter GDP, the government said the
economy grew at a 3.2 percent annual pace, with consumer spending
advancing at a 3.3 percent rate.
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In the wake of other data showing a bigger trade deficit than the
government had assumed, economists expect fourth-quarter GDP growth
to be lowered substantially when the government publishes updated
figures later this month.
"The running tally of revisions for fourth-quarter GDP point to a
downward revision to a 2.3 percent rate," said Michelle Girard,
chief economist at RBS in Stamford, Connecticut.
In a separate report, the Labor Department said initial claims for
state unemployment benefits rose 8,000 to a seasonally adjusted
339,000 in the week ended February 8. Economists had expected them
to slip to 330,000.
A four-week moving average of claims, considered a better measure of
labor market trends, rose 3,500 to 336,750, suggesting layoffs have
picked up only marginally.
Bad weather was likely behind the rise in filings last week. With
another winter storm hitting many parts of the country this week,
the survey period for February nonfarm payrolls, there is a good
chance of a third month of weak hiring.
"Weather may have an impact again in February on the payroll jobs
report, although ... the government will count you as working unless
you couldn't make it in to work every day of the pay period," said
Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi
UFJ in New York.
Last month, receipts at auto dealers fell 2.1 percent. It was the
second consecutive month of decreases. Auto manufacturers complained
last week that frigid temperatures had hurt sales. Retail sales
excluding automobiles were flat.
Sales of building materials and garden equipment rose 1.4 percent,
likely boosted by demand for snow removal equipment.
There were also gains in receipts at service stations and
electronics and appliance stores.
(Reporting by Lucia Mutikani; editing
by Andrea Ricci and Tim Ahmann)
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