What's behind falling U.S. retail sales

What’s behind falling U.S. retail sales

U.S. consumers spent less at auto dealers, gas stations and department stores in February, causing overall retail sales to slip 0.1%. It was the third consecutive month of declining retail sales, the Commerce Department said Wednesday, though retail sales are still 4% higher from a year ago. In a CIBC economics report, Royce Mendes, director […]

U.S. consumers spent less at auto dealers, gas stations and department stores in February, causing overall retail sales to slip 0.1%.

It was the third consecutive month of declining retail sales, the Commerce Department said Wednesday, though retail sales are still 4% higher from a year ago.

In a CIBC economics report, Royce Mendes, director and senior economist, notes that weakness was broad-based. “U.S. households have tightened their purse strings,” he says, leaving the economy set for a soft first quarter. Q1 growth is tracking 1.9%, he says.

So far, the promise of higher take-home pay from President Donald Trump’s tax cuts appears to have had little influence on spending for big ticket items such as autos.

Consumers have also continued migrating to online outlets such as Amazon and away from traditional department stores, dampening overall sales as the competition to charge the lowest price has increased. Retail sales are increasingly influenced by the aging of the baby boomer generation, who tend to spend less after retirement.

The weakness in core retailing is the most disappointing part of the report, says Mendes. Auto sales fell 0.9% last month, while purchases at gas stations tumbled 1.2%. Sales at department stores declined 0.9%.

But spending at online and catalogue retailers climbed, as did spending at building materials stores, restaurants and clothiers to offset much of the decline elsewhere.

Mendes calls non-store retailing, with a gain of +1.0%, “one of the few bright spots in this report.” He says the category has increased 10% over the past year, and “momentum isn’t likely to slow down anytime soon.”

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Still, the sales decline seems to contradict some of the optimism among retailers, which added a healthy 50,300 jobs in February, according to the Labor Department’s jobs report.

“We’ll chalk the weak data rolling in for Q1 as the usual volatility from quarter to quarter, rather than any lasting slowing in the underlying pace of consumption,” says Mendes. “The economy continues to create jobs at a very healthy pace, leaving us to believe that this soft patch will be short-lived.”

Read the full CIBC report.

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