What the Decline in January Retail Sales Actually Means

Retail sales numbers are always important to commercial real estate. Somebody has to enter the stores and spend money so the rent won’t be late. The advance retail and food service monthly sales for January were heavily off expectations.

The total was $700.3 billion, down 0.8% from December 2023, although up 0.6% from the previous January. Expectations were for a 0.2% month-over-month fall.

Retail trade sales were down 1.1% from December and 0.2% off from the same time last year. However, non-store retailer (e-commerce) sales were up 6.4% year over year. Food and drinking places were up 6.3% from the year before.

“This slowdown was widespread as nine of the 13 categories showed falling sales during the month,” Sam Millette, Director of Fixed Income for Commonwealth Financial Network, wrote in a prepared statement. “Weather likely played a role in the decline, as winter storms in early January may have discouraged potential buyers. With that being said, the slowdown in sales is a sign that the economic momentum from the end of 2023 may be starting to fade. Bond yields fell immediately following the release, as investors believe that a potential slowdown in economic activity could support rate cuts from the Federal Reserve later in the year.”

“Consumers pulled back on purchases for durable goods at physical stores but increased spending at restaurants and online,” said Jeffrey Roach, chief economist for LPL Financial, in prepared remarks. “From this report, we see that consumers are likely becoming more price conscious and perhaps, this is the first sign that the spending splurge is nearing the end.”

“We have expected consumers to reign in their spending this year after drawing down the pandemic-related savings, driving the savings rate well below its pre-pandemic levels, and increasing their reliance on credit,” wrote Nationwide Chief Economist Kathy Bostjancic

It’s the possibility of a slowdown in consumer spending that is the big worry, as it comprises 68% of GDP. Should that start to take a major slip, a recession could be on its way.

But now it’s time to look a little deeper and understand where the signals coming from the statistics may not be all they seem. There were “large declines in gasoline station” sales, according to Oxford Economics, because prices dropped. Weather may have held back building supply sales, off by 4.1%.

In addition, the figures aren’t the most reliable. As typical, according to the Census Bureau, which releases the data, the 90% confidence interval includes zero, so statistically it’s impossible to say whether there was any change at all.