U.S. retail sales up just 0.2 pct. as consumers stay cautious

WASHINGTON – U.S. retail sales rose slightly in January after a sharp drop in December, reflecting caution taken by consumers amid a government shutdown and volatile stock market.

Retail sales increased just 0.2 per cent, the Commerce Department said Monday, after a sharp fall of 1.6 per cent in December, the biggest drop in 9 years.

The economy has stumbled after healthy growth last summer and fall. Weaker economies overseas, the U.S.-China trade fight, and the 35-day government shutdown dented consumer and business confidence. Economists believe growth could fall below a 1 per cent annual rate in the first three months of this year.

In January, auto sales plunged by the most in five years, and furniture and electronics store sales also declined. Sales at home and garden stores rose by the most in nearly a year and a half.

Gas station sales fell, held down by lower prices, and sales at clothing stores also dropped. On a brighter note, sporting goods, hobby, and book stores reported the biggest sales increase in six years.

Businesses have added jobs at a solid pace in the past three months and paychecks, on average, are growing faster than a year ago. Still, consumers pulled back on spending over the holidays, and that caution appears to have spilled over into January.

Consumer spending, which includes spending on services as well as retail sales, fell in December by the most in five years.

The slowdown comes after consumer confidence fell for three straight months, dropping to an 18-month low in January. Americans grew more optimistic in February, however, suggesting that spending may pick up.

Spending over the winter holidays came in lower than expected, according to the National Retail Federation. The group had forecast holiday sales growth of 4.3 per cent to 4.8 per cent, but growth was just 2.9 per cent, the slowest in six years.