Frigid Temperatures Chill US Retail Sales, Factory Production

• U.S. retail sales experienced the most significant drop in 10 months in January, with a 0.8% decline, primarily attributed to adverse weather conditions and challenges in adjusting data for seasonal fluctuations.
• The Commerce Department's report indicates a potential slowdown in consumer spending, as retail sales for November and December were revised lower. However, a tight labour market and elevated wage growth suggest that consumer spending is not collapsing.
• The severe weather conditions, including frigid temperatures and snowstorms, contributed to the decline in retail sales. Building material and garden equipment store sales, motor vehicles and parts dealers, and gasoline station receipts were particularly affected.
• Freezing temperatures also impacted factory production, with a 0.5% decline reported in manufacturing output. Despite these weak reports, expectations for the U.S. central bank to refrain from cutting interest rates before May remain unchanged.
• While import prices saw their biggest gain in nearly two years, online sales dropped in January, and core retail sales (excluding specific categories) decreased by 0.4%. Despite these mixed signals, economists believe that consumer spending will continue to rise at a solid pace, supported by a resilient labour market and growing household purchasing power.

(Source: Reuters)