Retail sales took a deeper-than-expected dive in January — largely from the plummeting prices at the gas pumps — and consumers continued to keep a tight check on their spending.
Last month’s retail sales fell 0.8% to $439.8 billion from December, the Commerce Department said Thursday. Wall Street analysts had predicted a 0.5% drop. When stripped of gas sales, revenue for the sector was flat last month.
The fall-off in spending follows a dip of 0.9% in December, the biggest drop since the previous January. Economists said consumers remained cautious about spending despite a good job market and lower pump prices that put more money in their pockets.
Some economists said any decline in spending should be offset by strong job growth.
“Retail sales were very strong in the second half of 2014, so a small drop off is unlikely to represent a major change in direction,” said Mike Jakeman, global analyst for the Economist Intelligence Unit. “We are still satisfied that the U.S. economy will grow rapidly in 2015.”
But other experts said consumers may keep pulling back until income grows more.
The quality of jobs being created “remains lackluster, putting little upward pressure on wages and keeping consumers cautious,” said Lindsey Piegza, chief economist at Sterne Agee. “Gasoline price windfalls will continue to keep overall spending positive, but at a slower pace than the initial rise in October and November would suggest.”
Wall Street, which has seen a revival of volatility in stocks this year, shrugged off the report. All the major indexes posted gains for the day of up to 1.2%.
Economists blame weak consumer spending on stagnant wage growth that has persisted in spite of an improving labor market. But last month, average hourly earnings rose 12 cents to $24.75, after falling five cents in December. The 0.5% gain was the best since late 2008.
Retail sales account for a big chunk of consumer spending, which has been the primary engine of American economic output. They also are closely watched as a barometer of consumer confidence.
In January, six out of 13 major categories recorded a decline in sales.
Consumers spent 0.8% less on clothing and accessories. Furniture sales slipped 0.7%. Department stores sales dropped 0.7%.
Falling gas prices, which sent gas stations' sales down 9.3% last month, have failed to ignite large amounts of spending.
Despite a recent uptick in pump prices, consumers have enjoyed months of lower gas prices. The national average hit close to $2 a gallon in late January.
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