Revisions Soften February Retail Losses

Retail sales fell 0.2% in February but were revised up significantly for the previous two months. December was still in the red but not as much as initially reported. The bounce-back in January now appears stronger than previously reported. Motor vehicles and parts held up better than expected given the drop we saw in unit sales in February. That suggests that much of the weakness in unit sales was in fleet as opposed to consumer sales. We have also seen a sharp move up the food stream from less expensive compact cars to higher margin and more expensive SUVs.

The weakness in February was fairly broad-based; the outliers were vehicles, spending at gas stations, health and personal care stores and online. The bump in gasoline purchases was aided by a rise in the price of gasoline. Sales at health and personal care stores were boosted by a wicked cold and flu season, while the polar vortex kept people inside and spending online.

Core retail sales, which strip out the volatile vehicle and parts, gasoline, and building materials store sales, fell 0.6% in February. Again, we saw upward revisions to the previous two months.

Bottom Line
Consumers are still struggling to emerge from the hibernation that they entered in December. Real GDP appears to be expanding at a 1.3% pace in the first quarter. We expect to see a rebound in the second quarter but underlying momentum has slowed since 2018.

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