The below than expected retail sales for January has given fresh tools for those who are waiting in the wings to ring in alarm bells on the strength in economic resilience in the U.S.
The fresh economic data announced by the Government has already dragged down the stocks in the bourses.
After the Greek standout on the debt crisis was somewhat resolved amidst protest, market was expecting some positive catalyst on the retail sales to boost its sentiments. But the sentiments have dampened after the Commerce Department announced its data on retail sales. The saving grace is that if auto sales are excluded, then retail sales for January would have come above consensus. Obviously, this line of thinking limited the fall in stock prices.
The retail sales in January witnessed 0.4 percent growth after a flat December. However, year-over-year, retail sales increased 5.8 percent, Commerce Department data indicated. Street analysts estimated 0.6 percent growth, while Wells Fargo predicted a more optimistic 1.1 percent increase.
Auto sector is the culprit for the lower than estimated retail sales for January as consumers tightened their purse strings. Cars and auto parts sales witnessed 1.1 percent fall in January, whereas non-store retailers recorded 1.1 percent downside, the largest fall after March 2009.
Exclusive of auto sales, retail sales would have grown 0.7 percent, which is more than consensus projection of 0.5 percent, but still below Wells Fargo estimation of 0.8 percent for January.
Gasoline spending grew 1.4 percent, the sharpest gain after March 2011 and electronics receipt grew 0.5 percent.
For the month of December, the Commerce Department revised data indicates that there was no change in retail sales growth of 0.1 percent.
Wells Fargo indicated that the online and catalog sales fall reflected some difficulty seasonally adjusting the structural shift towards online shopping. The institution believes that gift card redemptions would have also played its part in limiting retail sales growth.
But the main worry seems to be motor vehicle sales that dropped 1.1 percent. Sales from motor vehicle dealers slipped 1.3 percent on top of a 2.9 percent growth in December. However, January's fall contradicts the robust manufacturer sales disclosed earlier in February, which indicated sales increased to 14.1 million units pace from a 13.5 million unit pace.
The saving grace from the latest government data is that Core retail sales still looked positive. Wells Fargo believes that if sales remain at the current level, it would mean 1.8 percent annualized rate of upside during the first quarter. This seems to be better than consensus predictions. This is also expected to allow economists to boost consumer spending outlook for the first quarter. Wells Fargo still expects consumer spending to be rising around a 2 percent pace in 2012 for its long term view.