U.S. retail sales fell less than expected in February, but a sharp downward revision to January’s data could reignite concerns about the economy’s growth prospects.
Tuesday’s weak report from the Commerce Department bucked the trend of recent labor market data that had suggested the economy remained on solid ground despite some fears of a looming recession.
The data could give the Federal Reserve more reason to keep interest rates unchanged on Wednesday, when it is due to release its latest policy statement.
“The economy’s engines are not going into reverse … but at the moment, it is hard to see GDP with a 2 percent handle. Based on today’s lackluster sales report, policymakers will be in no hurry to raise interest rates,” said Chris Rupkey, chief economist at MUFG Union Bank in New York.
Retail sales dipped 0.1 percent last month as automobile purchases fell and cheaper gasoline undercut receipts at service stations. January’s retail sales were revised down to show a 0.4 percent drop instead of the 0.2 percent gain previously reported.
Underscoring the report’s weakness, retail sales excluding automobiles, gasoline, building materials and food services were unchanged last month after a downwardly revised 0.2 percent increase in January.
These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product and were previously reported to have risen 0.6 percent in January. Economists had forecast retail sales slipping 0.2 percent and core retail sales advancing 0.2 percent in February.
The retail sales report combined with sliding oil prices to push U.S. stocks lower. The S&P 500 retail index .SPXRT, however, was little changed. Prices for U.S. government debt were marginally higher, while the dollar .DXY was largely unchanged against a basket of currencies.
Last month’s weak core retail sales reading, together with January’s modest gain, suggest that consumer spending will probably remain tepid in the first quarter after growing at a 2.0 percent annualized rate in the fourth quarter.