U.S. retail sales fell for the second time in three months in February, signaling economic growth for the first quarter will be tepid despite a surge in consumer spending in January.
The Commerce Department said on Monday retail sales dropped 0.2% in February as households cut back on purchases of furniture, clothing, food and electronics and appliances, as well as building materials and gardening equipment.
Economists polled by Reuters had forecast a 0.3% gain after an upwardly revised 0.7% surge in January.
Excluding automobiles, gasoline, building materials and food services, retail sales fell 0.2% in February compared with the revised 1.7% increase the previous month. Core retail sales correspond most closely with the consumer spending component of gross domestic product.
“The sharp upward revision to core retail sales in January was insufficient to reverse December’s plunge, leaving expectations for tepid GDP growth in the first quarter intact,” Reuters said.
Growth estimates for the January-March quarter are as low as a 0.8% annualized rate. The economy grew at a 2.2% rate in the fourth quarter after expanding at a 3.4% clip in the July-September period.
The signs of an economic slowdown — fueled by the fading stimulus from $1.5 trillion in tax cuts and increased government spending — have persuaded the Federal Reserve to ease off on raising interest rates.
“The consumer is lost in the woods and this makes for a gloomy economic outlook this year if they cannot find their way,” said Chris Rupkey, chief economist at MUFG in New York. “The Fed was wise to move to the sidelines.”
The surprise February dip in retail sales may have reflected, in part, delays in processing tax refunds due to the government shutdown and cold and wet weather. Some sectors of the economy such as construction spending and factory activity have been trending upward.
“Our bottom line is that U.S. consumers remain on firm footing, though rising gasoline prices could curb growth in spending in other categories,” Richard Moody, chief economist at Regions Financial, said.
Sales at gas stations rose 1% in February and auto dealers posted a 0.7% increase.