WASHINGTON – Retail sales in the U.S. fell unexpectedly in January, signaling a potential impact from high inflation. The 1.9% decline in retail sales was more than double the expected drop, painting a concerning picture for the economy.
Excluding automobile sales, the decrease was even more significant, with a 0.6% drop, well below the estimated 0.2% gain. These figures are adjusted for seasonal factors but not for inflation, highlighting a lag in spending compared to the pace of price increases.
An increase in headline inflation by 0.3% in January, and 0.4% when excluding food and energy prices, as reported by the Labor Department, raised concerns. On a year-over-year basis, the readings were 3.1% and 3.9% respectively, indicating a steady rise in prices.
Certain sectors were especially hard hit, such as building materials and garden stores which saw a 4.1% decline in sales. Miscellaneous store sales fell by 3%, and motor vehicle parts and retailers saw a 1.7% decrease. On a positive note, restaurants and bars reported a 0.7% increase in sales.
Despite a strong U.S. growth picture, concerns over persistently high inflation casting a shadow over future prospects persist. However, a separate report showed a continuing strength in the labor market, providing a critical foundation for the economy.
The decline in retail sales highlights the impact of inflation on consumer spending, and the unexpected downturn in several sectors raises concerns about the overall economic outlook. Despite a strong finish to the year in terms of GDP growth, the persistence of high inflation could potentially jeopardize future growth.