A spike in gasoline and apparel prices, combined with cold weather across much of the U.S., drove down retail sales by 0.3% in January, marking the largest monthly dip in nearly a year, according to economists.
The U.S. Department of Commerce on Feb. 14 reported a 0.3% seasonally adjusted decline in retail sales to $492.0 billion in January, largely driven by declines in auto sales and building and supplies stores, as well as flat online sales.
It not only marked the largest drop since February 2017, when sales also declined 0.3%, but also fell below economists' expectations, many of whom had predicted a rise in sales for the first month of post-holiday-season shopping.
Economists also took note of a revision in the Commerce Department's December 2017 retail sales figures, which were revised downward to flat for the month from the previously estimated 0.4% month-over-month increase.
However, January sales figures painted a brighter picture year over year. Overall retail sales were up 3.6% from January 2017, and all but one product category — sporting goods, hobby, book and music stores — saw sales increase year over year. Nonstore retail sales were up 10.2% from January 2017, while gas sales were up 9% and furniture and home furnishings stores' sales increased by 4.7%.

Sales declines were seen in five of the 13 product categories covered in the report, including sales at motor vehicles and parts dealers, which fell by 1.3% in January to $100.37 billion, as well as sales at building materials, garden equipment and supply dealers, which fell by 2.4% to $31.86 billion. Nonstore sales, which includes e-commerce, were flat in January. Morgan Stanley said the monthly January sales decline came in "well below" its projection of a 0.1% increase. As a result, the firm lowered its first-quarter GDP tracking estimate to 2.9% from a previous forecast of 3.3%.
The sharpest gains came at clothing and clothing accessories stores, which saw sales rise by 1.2% to $22.12 billion, as well as at electronics and appliance stores, which saw sales increases of 0.5% to $8.19 billion in January.

He also attributed the slowdown in online sales, a typical driver in monthly sales increases, to rising apparel and gas prices. The Consumer Price Index report, released by the U.S. Labor Department on Feb. 14, showed that apparel prices rose by 1.7% over the past month. Rajeev Dhawan, director of the Economic Forecasting Center at the Robinson College of Business at Georgia State University, said in an interview that a 5.7% increase in gas prices in January could have limited discretionary spending by consumers in the other product categories. Gasoline sales rose by 1.6% to $41.40 billion in January.
"The gasoline spending jumped a lot in January because gas prices have been rising and that takes away from retail spending," Dhawan said. "That certainly affects the online spending."
Both Dhawan and Moody's Analytics Senior Director Scott Hoyt attributed the weak building supply sales to slowed hurricane recovery spending from late summer 2017.
Hoyt said sales at health and personal care stores, which fell 1.2% month over month to $27.40 billion in January, were also down despite well-documented cases of the flu throughout the U.S.
"Retail sales came in much weaker than expected in January," Hoyt said. "Sales at drug stores fell despite the flu outbreak. Building supply stores and restaurants suffered from bad weather, with the former also likely suffering from waning disaster recovery spending."
Chris Christopher, executive director of U.S. and consumer economics at IHS Markit, along with Macroeconomic Advisers Director Kathleen Navin, wrote in a joint report that winter weather could have driven some of the poor sales.
"Colder weather may have been the reason for the surge in spending at clothing and department stores, while deep price discounting may have propelled electronics stores into positive territory," they wrote. "The colder weather, however, likely also contributed to less spending at building materials and garden supply stores."
Naveen Jaggi, president of retail brokerage and capital markets for investment firm Jones Lang LaSalle, called the drop in sales from December 2017 to January "unsurprising" given the strength and volume of the holiday month, but expressed optimism for year-over-year sales growth.
"All of the factors that [led] to the best holiday shopping season since the Great Recession were still predominantly in place for January," Jaggi said in a note. "Consumer confidence in particular remained strong, rising above economist expectations."
