US retail sales drop well below expectations in January

US retail sales disappointed by falling way below expectations in January, with harsh weather mainly to be blamed for last month’s drop, along with wildfires in California.

Retail sales fell 0.9% in January following an upwardly revised 0.7% increase previous month and missed forecast for 0.2% drop.

Core retail sales which exclude automobiles, gasoline, building materials and food services and correspond most closely with the consumer spending component of gross domestic product, dropped 0.8% last month after 0.8% rise in December.

January’s decline was in a way anticipated, as markets calmed after holiday shopping, as well as adjusting after strong gains in past four months, partially driven by increased buying in anticipation that tariffs would lift prices.

US household wealth remains at record highs and underpins spending, which fuels wage growth and adds to signals for further economic recovery after the US economy expanded by 2.3% in the last three months of 2024, compared to 3.1% growth in Q3.

The dollar fell further against the most of its major counterparts after the data release, with dollar index hitting the lowest in two months and on track for the second consecutive big weekly loss.