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Bad weather slams retail sales
Question of the Day
Extremely cold and snowy weather inhibited America’s shoppers last month, causing a 0.4 percent drop in retail sales, and the Christmas selling season was poorer than previously reported, the Census Bureau reported on Thursday.
Auto dealerships, department stores, restaurants and furniture outlets were hit particularly hard as consumers opted to stay home and stay warm rather than venture out and into the malls.
“January retail sales dipped into negative territory as temperatures dropped and snow came down,” said Chris G. Christopher Jr., director of consumer economics and IHS Global Insight. “Building material stores and gasoline stations were the only channels that posted strong gains.”
Downward revisions that showed a 0.1 percent decline in retail sales in December and a smaller gain of 0.4 percent in November revealed that what was once considered a robust early start to the Christmas season actually was only a tepid one.
“The holiday retail sales shopping season was the weakest since 2009,” with an overall gain of only 3.4 percent over the 2012 shopping season, Mr. Christopher said.
While the gloomier-than-expected Christmas was due in part to the early onset of an unusually cold winter, economists said they don’t expect a rebound any time soon as the cold weather trend has continued into February, with the East Coast currently getting slammed by another major winter snowstorm.
“Unfortunately, the February retail sales report is looking like another bad weather story as well,” Mr. Christopher said.
The big damper weather put on sales does not bode well for economic growth, as consumers drive nearly 70 percent of economic activity. Ted Wieseman, economist at Morgan Stanley, said he estimates growth in the last quarter of 2013 was closer to 2.5 percent than the 3.2 percent rate reported last week by the Commerce Department, thanks to the worse than expected Christmas shopping season revealed in Thursday’s retail sales report.
The downward revisions for last year came as an unpleasant surprise to economists and is prompting many to temper expectations.
“Weakness in January was not too surprising after widespread indications of a large weather drag on sales in the middle and eastern parts of the country during the last week of the month,” but Mr. Wieseman said he had figured growth was healthier at the end of last year.
“Given the latest weather fiasco hitting much of the country … after pretty terrible weather earlier in February, we’ve abandoned the idea that we’ll see a weather rebound in spending in February,” he said.
The double-whammy from the weather could push growth down to as low as 0.9 percent in the first quarter before growth rebounds in the spring, he said.
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