U.S. retail sales fell by the most in more than a year in February and the coronavirus outbreak is expected to depress sales in the months ahead, which could strengthen economists’ expectations of a consumer-led recession by the second quarter.
The report from the Commerce Department on Tuesday showing a broad decline in sales followed on the heels of the Federal Reserve’s decision on Sunday to slash interest rates to near zero, pledge hundreds of billions of dollars in asset purchases and backstop foreign authorities with the offer of cheap dollar financing.
Fed Chair Jerome Powell said the epidemic was having a “profound” impact on the economy.
Retail sales dropped 0.5% last month, the biggest decline since December 2018. Data for January was revised higher to show retail sales accelerating 0.6% instead of rising 0.3% as previously reported. Economists polled by Reuters had forecast retail sales climbing 0.2% in February.
Compared to February last year, retail sales increased by 4.3%. Excluding automobiles, gasoline, building materials, and food services retail sales were unchanged last month after increasing by an upwardly revised 0.4% in January.
These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. They were previously reported to have been unchanged in January.
U.S. stock index future pared gains after the retail sales report. U.S. Treasury prices fell, while the dollar rose against a basket of currencies.
The coronavirus, which causes an illness called COVID-19, has killed more than 6,600 people and sickened about 174,000 across the world, according to a Reuters tally. It has crippled the transportation, leisure and hospitality industries, as well as the manufacturing sector.
A survey from the New York Fed on Monday showed a record plunge in factory activity in New York state in March to levels last seen in 2009.
Goldman Sachs on Sunday cut its first-quarter gross domestic product forecast to zero from a 0.7% annualized rate. The investment bank also expects GDP to contract at a 5.0% rate in the second quarter. Economists expect the economy to sink into a recession by the second quarter.
The economy grew 2.3% in 2019, slowing from 2.9% in 2018.
In February, auto sales decreased by 0.9% after rising 0.8% in January. Receipts at service stations tumbled 2.8%, reflecting cheaper gasoline. Sales at electronics and appliance stores declined 1.4%.
Sales at building material stores plunged 1.3%, after being boosted in recent months by unseasonably mild temperatures.
Receipts at clothing stores fell 1.2% last month. Online and mail-order retail sales rose by 0.7%. That followed a 0.2% gain in January. Receipts at furniture stores slipped 0.4%.
Grocery and healthcare store sales fell marginally. There was panic buying in late February, which saw shelves at supermarkets, pharmacies and other establishments cleaned out of household essentials, including food and toilet paper.
Sales at restaurants and bars dropped 0.5%, and economists expect sharp declines in the months ahead. The Centers for Disease Control and Prevention recommended cancellation of gatherings of 50 or more over the next eight weeks in an effort to control the rapidly spreading disease.
Some state and local governments such as California and Washington DC have closed restaurants and bars. The virus has shut down sporting events and concerts.
In February, spending at sporting goods, hobby, musical instrument and book stores edged up 0.1%.
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