American consumers are finally showing signs of stress as US retail sales dropped by 0.8 per cent in January, below expectations of a 0.2 per cent drop.
In the largest decrease for retail sales since March 2023, the US Census Bureau reported that American consumers spent $700.3bn last month, compared to $706.2bn in December.
After stripping out automobiles and gasoline, core retail sales fell 0.6 per cent, compared to expectations for an increase of 0.2 per cent.
Today’s data revealed that sales of building materials and garden equipment saw the biggest fall, dropping 4.1 per cent, while gasoline stations dropped 1.7 per cent.
Meanwhile, online sales fell 0.8 per cent and business at clothing and accessory stores decreased by 0.2 per cent.
The US had seen retail sales grow in eight of the last nine months, and this is the first piece of data out to suggest that the US economy may be beginning to start showing some cracks as interest rates have reached 23-year highs.
December’s GDP figures, which were released three weeks ago, smashed expectations, revealing that the US economy grew 3.3 per cent in the final quarter.
Meanwhile, a strong US jobs report for January pushed any chance of an imminent interest rate cut from the Federal Reserve “off the table” in the eyes of analysts.
While the odds of a March rate cut from the Fed still sit at a measly 10 per cent, according to data from CME Group, today’s figures nudged the chance of a May cut up from 38.3 per cent to 44.9 per cent.