Worries in soft data corroborated by weak Retail Sales

Summary

Despite a downward revision that makes last month's drop in retail sales the biggest monthly decline since 2021, overall retail sales rose a scant 0.2% in February. The 1.0% gain in control group sales offers little consolation as it mirrors a decline of the same magnitude in January.

Broad-based declines

February's retail sales report was expected to show a bounce after a weak report for January. The key thing to understand in today's report is that last month's sales figures were revised sharply lower resulting in what turns out to be the worst month for retail sales since 2021. The 0.2% increase in headline retail sales for February was just a third of the 0.6% increase that had been expected. The fact that this modest bounce comes on the heels of the downward revision makes it all the more disappointing.

Worries about the ability of consumers to keep spending have been bubbling up at a more rapid pace in recent weeks with airlines and major retailers pointing to a slackening in demand. That was evident in today's report with spending at bars and restaurants down 1.5% in the month, a decline that was only exceeded by department stores where sales fell 1.7% (chart). Other stores reporting falling sales included electronic and appliance stores, clothing stores and, most impactful, auto dealers where sales fell 0.4% in February.

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