Washington — US retail sales fell for a third consecutive month in February as households cut back on purchases of motor vehicles and other big-ticket items, pointing to a slowdown in economic growth in the first quarter.
Other data on Wednesday showed underlying producer prices increasing solidly in February amid strong gains in the cost of services such as hotel accommodation, airline fares and hospital inpatient care. Inflation is steadily rising and the Federal Reserve is expected to raise interest rates next week.
The Commerce Department said retail sales slipped 0.1% in February. January data was revised to show sales dipping 0.1% instead of falling 0.3% as previously reported. It was the first time since April 2012 that retail sales have declined for three consecutive months.
Economists had forecast retail sales rising 0.3% in February. Retail sales in February increased 4% from a year ago.
Excluding cars, fuel, building materials and food services, retail sales edged up 0.1% in February after being unchanged in January. These so-called core retail sales correspond most closely with the consumer spending component of GDP.
Consumer spending, which accounts for more than two-thirds of US economic activity, appears to have slowed at the start of the year after accelerating at a 3.8% annualised rate in the fourth quarter.
The dollar slipped against a basket of currencies after the data, while prices for US Treasuries were little moved. US stock index futures slightly extended gains.
Slower consumer spending supports expectations of moderate economic growth in the first quarter. GDP growth estimates for the January-March quarter are about a 2% annualised rate.
The economy grew 2.5% in the fourth quarter. Revisions to December data on construction spending, factory orders and wholesale inventories have suggested the fourth-quarter growth estimate could be raised to 3.0%.
Consumer spending remains underpinned by a strong labour market, which is viewed by Fed officials as being near or a little beyond full employment. The economy created 313,000 jobs in February.
Consumer spending could also get a lift from a $1.5-trillion income tax cut package. Car sales fell 0.9% in February after a similar drop in January. Receipts at petrol stations declined 1.2%, reflecting lower fuel prices.
There were also declines in sales at furniture stores, health and personal care stores and electronics and appliance stores. But there were some pockets of strength. Sales at building material stores increased 1.9% in February. Receipts at clothing stores gained 0.4% and sales at online retailers surged 1.0%.
Consumers also spent more at restaurants and bars and on sporting goods and hobbies.
In a separate report, the Labour Department said a key measure of underlying producer price pressures that excludes food, energy and trade services rose 0.4% in February, matching January’s gain. That boosted the year-on-year increase in the so-called core producer price index to 2.7%, the biggest gain since August 2014, from 2.5% in January. The increase in underlying wholesale prices supports views that consumer inflation will pick up in 2018.
Economists believe that a tightening labour market, weak dollar and fiscal stimulus from the tax cuts and increased government spending will lift inflation towards the Fed’s 2% target in 2018.
The US central bank’s preferred inflation measure, the personal consumption expenditures price index excluding food and energy, has been undershooting its target since May 2012.