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 The Commerce Department said on Thursday retail sales excluding
automobiles, gasoline, building materials and food services edged up
0.1 percent last month after a 0.3 percent drop in December.
The so-called core retail sales correspond most closely with the
consumer spending component of gross domestic product.
"Overall, the tone of this report was disappointing as it points to
a weak start to spending activity this year, despite the significant
boost to disposable income from lower gasoline prices," said Millan
Mulraine, deputy chief economist at TD Securities in New York.
Wall Street had expected core retail sales to increase 0.4 percent
last month. The soft reading could see economists trim their
forecasts for first-quarter GDP growth. The economy grew at a 2.6
percent annual pace in the fourth quarter.
However, inventory and trade data for December suggest growth could
be revised to as low as a 1.7 percent rate.
U.S. financial markets were little moved by the data with attention
focused on details of a ceasefire agreement between Russia and
Ukraine and a surprise interest rate cut and bond purchasing program
by Sweden's central bank.
Despite a 39.5 percent decline in gasoline prices since June,
consumer spending has been soft in the past two months. Economists
say households are using the extra income to pay down debt and boost
savings.
REBOUND AWAITED
Still, cheaper gasoline prices and robust employment gains are
expected to provide a powerful stimulus to consumer spending and
keep the economy on an expansion path, despite sputtering growth in
Asia and Europe.
"Should we be worried about the weakness of underlying sales over
the past two months? Possibly," said Paul Ashworth, chief U.S.
economist at Capital Economics in Toronto.
"But all the conditions are in place for a period of very strong
consumption growth. We still expect to see that strength come
through in the retail sales data soon."
Consumer spending, which accounts for more than two-thirds of U.S.
economic activity, expanded at its quickest pace since 2006 in the
fourth quarter and is expected to maintain a brisk pace of growth
this year.
A separate report from the Labor Department on Thursday showed
initial claims for state unemployment benefits rose 25,000 to a
seasonally adjusted 304,000 last week, but the underlying trend
remained consistent with a strengthening labor market.
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Difficulties adjusting the claims data for seasonal variations have
caused volatility in recent weeks.
The four-week moving average of claims, seen as a better measure of
labor market trends as it irons out week-to-week volatility, fell
3,250 to 289,750 last week.
"The trend (in payrolls growth) is likely still solidly over 200,000
per month, more than strong enough to keep the unemployment rate
trending down," said Jim O'Sullivan, chief U.S. economist at High
Frequency Economics in Valhalla, New York.
The economy has added more than a million jobs over the past three
months, an achievement last seen in 1997. A key measure of labor
market slack - the number of job seekers for every open position -
hit its lowest level since 2007 in December.
In January, core retail sales were held back by the biggest drop in
just over a year in furniture and home furnishings sales. There were
declines in receipts at clothing retailers as well as at sporting
goods stores, where sales recorded their biggest drop since January
of last year.
Sales at online retailers and electronic and appliance stores rose
last month. Declining gasoline prices undercut sales at service
stations, where receipts plunged 9.3 percent, the biggest fall since
December 2008.
Weaker service station receipts and a 0.5 percent drop in automobile
sales pushed overall retail sales down 0.8 percent last month. It
was the second straight monthly decline.
Sales for building materials and garden equipment rose last month,
likely boosted by preparations for a blizzard in the Northeast.
Receipts at restaurants and bars also increased.
(Reporting by Lucia Mutikani; Editing by Paul Simao)
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