WASHINGTON, Feb 15 — US retail sales fell more than expected in January, pulled down by declines in receipts at auto dealerships and gasoline service stations.

Retail sales dropped 0.8 per cent last month, the Commerce Department’s Census Bureau said today, also likely weighed down by winter storms. Data for December was revised lower to show sales rising 0.4 per cent instead of 0.6 per cent as previously reported.

Economists polled by Reuters had forecast retail sales dipping 0.1 per cent. Retail sales are mostly goods and are not adjusted for inflation. The fall followed a fairly strong performance over the holiday season. December sales are also partially flattered by generous seasonal factors, the model the government uses to strip out seasonal fluctuations from the data.

Unadjusted retail sales typically fall in January. The seasonal factors were less supportive for this January compared to previous years, resulting in the large drop in adjusted sales last month. Economists had cautioned before the release of the data not to read too much into any sharp drop.

"It is hard to know exactly what the ‘right’ seasonal factor is for a given month but the seasonal factors associated with December 2023 and January 2024 look unusual relative to the ones associated with these months in earlier years,” said Daniel Silver, an economist at JP Morgan in New York. "The individual seasonally adjusted changes for these months likely should be discounted when trying to determine the trend for the data.”

Though momentum is likely to slow this year, consumer spending remains healthy, thanks to a resilient labour market and rising household purchasing power as inflation subsides.

A separate report from the Labour Department today showed initial claims for state unemployment benefits fell 8,000 to a seasonally adjusted 212,000 for the week ended Feb. 10.

Claims are bouncing around low levels despite a recent rush of high-profile layoffs, mostly in the technology and media sectors. Economists had forecast 220,000 claims for the latest week. With the labor market still tight, some of the laid off workers could be landing new jobs easily.

Companies are mostly reluctant to layoff workers after struggling to fill jobs during and after the Covid-19 pandemic.

Retail sales excluding automobiles, gasoline, building materials and food services decreased 0.4 per cent in January. The so-called core retail sales measure corresponds most closely with the consumer spending component of GDP.

Core sales for December were revised down to show them rising 0.6 per cent instead of the previously reported 0.8 per cent. Economists are forecasting strong services spending growth in January, which should keep overall consumer spending afloat.

Consumer spending, which accounts for more than two-thirds of US economic activity, increased at a brisk clip in the fourth quarter, contributing to the economy’s 3.3 per cent annualised growth pace. The economy expanded at a 4.9 per cent rate in the July-September quarter. — Reuters