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Soft February Retail Sales Raise Questions About Consumer Spending

Retail and food services sales slid by 0.1% in February compared to the previous month, according to newly released data from the U.S. Census Bureau. However, the $492 billion total represents a 4 percent increase over February 2017.

Retail sales were also down 0.1% month-on-month but up 4.2% over last February.

Though these numbers seem to suggest that retailers are losing the momentum that carried them through the robust holiday season, the National Retail Federation says look closer.

“Consumers are still in the driver’s seat,” NRF chief economist Jack Kleinhenz said. “Month-to-month comparisons don’t tell the whole story because of seasonal adjustment factors, but the three-month moving average and other year-over-year numbers are better indicators that reflect how sales are really increasing. It’s still too early to draw conclusions about the impact of tax cuts but extra money in shoppers’ pockets should help as the year goes forward. With consumer confidence and employment growing, economic fundamentals are favorable for spending to expand in the coming months.”

The trade organization reaffirmed its outlook, which pegs annual retail sales growth for 2018 at 3.8% to 4.4%.

The sales numbers prompted IHS Markit to lower its forecast for the quarter by three-tenths of a percent to 1.8%.

“Core sales—the portion of sales that bears directly on our tracking for consumer spending—rose just 0.1% in February, in contrast to our estimate for 1.1% gain. Our expectation for a much larger increase in February reflected our view that unseasonably mild weather would provide a sizable boost—a boost that we did not get in today’s report,” according to Kathleen Navin, director of Macroeconomic Advisers by IHS Markit.

Non-store sales, including online pureplays, reached $55.1 billion, which is a 1 percent increase over January and 10.1% gain when compared the prior year period.

Department store sales were down 0.9% to $12.6 billion in February compared to January and flat year-on-year. Clothing stores totaled $22.2 billion in sales, a 0.4% increase for the month, but up 4.9% over February 2017.

The government department adjusted the January 2018 performance when compared to December. Originally reported as a 0.3% decline, it was actually only down by 0.1%.

Though February sales disappointed, IHL said there’s still reason to think retail will rally next month, as “tax refunds are coming in later in the refund season, suggesting March retail sales could see a boost from this source,” Navin said.