Christopher Lugerber and Anne Die Inogio, AP Business Writer
WASHINGTON (AP) – US retail sales fell sharply last month. This is because cold weather kept more Americans indoors and stopped selling at car dealers and most other stores.
After two months of healthy profit, retail sales fell 0.9% from the previous month in January, the Commerce Department said. It was a much larger decline than economists had expected, the biggest decline in the year.
According to Pantheon’s macroeconomics, the average temperature in January was the lowest since 1988, and was particularly devastating in the milder south. The devastating fire in Los Angeles could have also affected spending.
As some analysts had expected, the data doesn’t show that Americans rushed to buy items in January to preempt President Donald Trump’s proposed tariffs. However, sales in December were higher. Many consumers may just cut back in January after being splattered during the holiday season.
The tail-off of sales could provide some level of security in the Federal Reserve that the economy may not overheat after a very hot read on January inflation.
Also, a decline in retail sales shows that it will grow more slowly during the economy’s expansion in the first three months of the year. It grew at an annual rate of 2.3% in the last quarter of last year.
Last month, sales fell 2.8% at car dealers, and collapsed at furniture stores, homes and garden centres. Usually, even the strong online retail sector saw a 1.9% decline. Sales rose in General Merchandise Stores, a category that includes large retailers such as Walmart and Target, as well as restaurants and bars.
In addition to cold weather, the decline in sales could partially refer to a decline in consumer confidence, as reflected in a recent survey by the Conference Committee and the University of Michigan. Still, employment and wage growth is stable, suggesting that the economy is still expanding. Last week, the government reported that it had reported unemployment rates of 4% in the second month.
Inflation rose last month despite efforts by the Federal Reserve to cool prices through higher interest rates. Grocery costs jumped from the previous month to January, increasing egg prices. The rising costs at grocery stores are forcing Americans to hit the ground.
A struggling retail chain has been forced to cut costs and close low-performance locations.
One of these chains, Joan, filed for Chapter 11 bankruptcy protection for the second time last month in a year, saying it would close around 500 locations this week.
The Lake owners, inspired by Surfer and Skater, filed for bankruptcy protection last week with labels such as Quiksilver, Billabong and Volcom. The company, the liberated brand, is planning to close its stores.
The environment for all retailers could be more dangerous as Trump raises tariff threats, which could lead to higher prices. Trump said Thursday that he would soon impose “mutual” tariffs on countries that collect large obligations on exporting US goods. Trump has already added a 10% import tax on goods from China and says it will impose a 25% tariff on all steel and aluminum imports.
David French, executive vice president of the National Retail Federation, warned that import tax could raise consumer prices.
“We support the president’s efforts to reduce trade barriers and imbalances, but the business is large and will seriously destroy the supply chain,” France said Thursday. Ta. “It will likely bring higher prices to make American families hard work and erode household expenditure.”
Retail executives say it’s difficult to plan given the liquidity of tariff policies under the Trump administration.
Kim Tobman, CEO of Bouqs, an online floral retailer based in Marina del Rey, California, said most of her vases come from China and the 10% increase wasn’t as bad as expected. She doesn’t expect to raise prices, but she is considering other regions to source Vietnam, Indonesia and other regions.
“We feel we can absorb that at this moment,” Tobman said.
She experienced the turbulence that comes with Trump’s changing tariff plans during her showdown last month with Colombia, a massive exporter of large flowers.
Trump has promptly announced a series of retaliatory measures, including exporting 25% tariffs on Colombia to the United States. Columbia is the largest flower exporter in the United States and represents the majority of sourcing for Bouq’s flower arrangements, Tobman said. The Columbia government ultimately agreed to Trump’s demands, and tariffs never came to fruition.
Original issue: February 14th, 2025, 11:16am EST
