Economy

US retail sales fall in February after hot start to 2023

Separately, wholesale producer prices fell unexpectedly, driven mostly by drop in cost of eggs

People walk along 5th Avenue in New York. The Commerce Department reported Wednesday that retail sales slipped cooled off somewhat in February after an unexpectedly hot start to the year. Photograph: Spencer Platt/Getty Images

Wed Mar 15 2023 - 14:37

US retail sales fell in February as purchases of motor vehicle purchases and other goods slumped, payback after January’s unexpected, outsize increase, but consumer spending continued to show underlying strength. Producer prices, meanwhile, unexpectedly declined in February after downward revisions to the prior month, pointing to an easing of cost pressures in corners of an economy still battling the highest inflation in a generation.

The US Commerce Department said on Wednesday that retail sales dropped 0.4 per cent last month after a sharp, 3.2 per cent jump in January that smashed economists’ expectations.

Retail sales are mostly goods and are not adjusted for inflation. Economists said challenges adjusting the data for shifts in spending patterns at the end and start of the year as well as higher prices were among the factors that had exaggerated January’s retail sales surge.

Separately on Wednesday, new data from the US Bureau of Labour Statistics indicated that producer prices for final goods fell 0.1 per cent in February but remained 4.6 higher than a year previous.

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Unlike the retail sales data, the decline in the producer price index (PPI) reflected decreases in the prices of both goods and services. However, more than 80 per cent of the retreat in merchandise can be attributed to a drop in the cost of eggs, the agency said. Services prices were restrained by machinery and vehicle wholesaling.

The data come just a day after the closely watched consumer price index showed broad-based and persistent inflation, buoyed by a strong labour market. The PPI, which is a measure of wholesale prices, has slowed significantly on a year-on-year basis amid improving supply chains and declines in many commodities.

When paired with Tuesday’s CPI and turmoil in the banking sector, the data present a tricky picture for Federal Reserve officials as they deliberate whether to extend interest-rate increases at next week’s closely watched meeting. – Bloomberg

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