The report from the Commerce Department on Monday was welcome news for the economy after a raft of weak December data, as well as a sharp moderation in the pace of job growth in February. Still, January’s increase in retail sales recouped only a fraction of December’s plunge, leaving expectations for a slowdown in consumer spending in the first quarter intact.In other words, retail sales would have dropped again if December’s totals didn’t get revised even lower.
“Sales managed only a tepid reversal in January from December’s deep freeze,” said Douglas Porter, chief economist at BMO Capital Markets in Toronto. “While we expect some further comeback in the next couple months, the big story is that the economy’s big engine is cooling.”
Retail sales rose 0.2 percent as increased purchases of building materials and more discretionary spending offset the biggest decline in motor vehicle sales in five years. Data for December was revised to show sales tumbling 1.6 percent instead of decreasing 1.2 percent as previously reported.
Granted, take out lower gasoline sales (which reflect the drop in prices that has since reversed), and the January increase was a better 0.4%. But that stat is still 0.8% below what we had in November, and the average over the last 3 months have only increased by 0.1% than the prior 3 months. And that’s before inflation.
I also noted that new home sales came crashing down after 2 months of increases to round out 2018.
Sales of new single‐family houses in January 2019 were at a seasonally adjusted annual rate of 607,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 6.9 percent (±16.3 percent)* below the revised December rate of 652,000 and is 4.1 percent (±14.0 percent)* below the January 2018 estimate of 633,000.Ugh. And while this week’s report on construction spending showed a decent increase of 1.3% overall, it was entirely in the public sector while the private sector flatlined, and home construction kept falling.
Spending on private construction was at a seasonally adjusted annual rate of $966.0 billion, 0.2 percent (±0.7 percent)* above the revised December estimate of $964.2 billion. Residential construction was at a seasonally adjusted annual rate of $511.4 billion in January, 0.3 percent (±1.3 percent)* below the revised December estimate of $512.9 billion. Nonresidential construction was at a seasonally adjusted annual rate of $454.7 billion in January, 0.8 percent (±0.7 percent) above the revised December estimate of $451.2 billion.Isn’t it funny how public spending jumps when Republicans run the show to keep things moving?
Sure, things aren’t all bad. Consumer inflation went up in February for the first time in 3 months, but only by 0.2%, and inflation over the last year (1.5%) is at its lowest level since the Summer of 2016. This, along with a bump up in hourly wages, means that real hourly wages are up by their most in several years.
So now the question is whether the decent wage figures will keep consumer spending (and the economy) afloat, or if people start clamping down due to having to write surprise checks to the IRS due to the GOP Tax Scam. I also want to see if the brutal winter delays some spending, and if the 41,000 announced job cuts in retail for the first 2 months of 2019 aren’t made up in other sectors of the economy, and start spreading.
The Atlanta Fed isn’t counting on much so far. They think that GDP growth for the 1st quarter of this year will be near zero.
We’ll see. There’s still a bit of a backlog of economic data due to the shutdown from the start of this year. That’ll be caught up soon for both February and March, and if the numbers remain in the December-January doldrums, things could start spiraling fast.