U.S. retail sales unexpectedly fell in February, the latest sign economic growth has shifted into low gear as stimulus from $1.5 trillion in tax cuts and increased government spending fades.
The weak report from the Commerce Department on Monday joined a raft of other soft data, including housing starts and manufacturing production that have left economists anticipating a sharp slowdown in growth in the first quarter.
The loss of economic momentum also reflects higher interest rates, slowing global growth, Washington’s trade war with China and uncertainty over Britain’s departure from the European Union. These factors contributed to the Federal Reserve’s decision last month to abruptly end its three-year campaign to tighten monetary policy.
The U.S. central bank abandoned projections for any interest rate hikes this year after increasing borrowing costs four times in 2018.
Retail sales dropped 0.2 percent as households cut back on purchases of furniture, clothing, food and electronics and appliances, as well as building materials and gardening equipment. Data for January was revised higher to show retail sales increasing 0.7 percent instead of gaining 0.2 percent as previously reported.
Economists polled by Reuters had forecast retail sales rising 0.3 percent in February. Retail sales in February advanced 2.2 percent from a year ago.
The surprise drop in sales in February could partly reflect delays in processing tax refunds in the middle of the month. Tax refunds have also been smaller on average compared to prior years following the revamping of the tax code in January 2018. Cold and wet weather could also have hurt sales.
The February retail sales report was delayed by a 35-day partial shutdown of the federal government that ended on Jan. 25. March’s retail sales report, which was scheduled for publication on April 16, will be released on April 18.
The dollar slipped against a basket of currencies after the report. U.S. Treasury prices pared losses.