American Shoppers Unmoved by Stock Market Records

Wall Street can shake its pom-poms all it wants, but Americans still aren't rushing out to spend.

Retail sales rose a seasonally adjusted 0.3% in January from a month earlier, the Commerce Department reported on Friday. That was in line with economists' estimates, but the details of the report were less than stellar.

Sales excluding auto dealers, gas stations, restaurants, and building-equipment and garden suppliers--the control group that economists use to track the trend in consumer spending--were flat from a month earlier. Most forecasters expected a gain. Worse, control sales figures for both December and November were revised downward. So it looks as if consumer spending was weaker than the initial report on fourth-quarter gross domestic product supposed. Nor did it start the first quarter off on especially strong footing.

None of this means that consumer spending is suddenly going into retreat, but it does show that, despite the strong job market, and despite the stock market pushing ever higher, shoppers are in no mood to extend themselves. Moreover, points out JPMorgan Chase economist Michael Feroli, control sales have been looking tepid since the summer, so the slowdown is looking less and less like payback for robust sales earlier in the year.

Meanwhile, manufacturers remain in a funk, with the Federal Reserve on Friday reporting that factory output slipped by a seasonally adjusted 0.1% in January from December. So it seems unlikely that spending on new capital equipment is going to pick up any slack from slower consumer spending. Many forecasters lowered their gross-domestic-product growth forecasts following Friday's data. Goldman Sachs economists, for example, now expect GDP growth of 1.4% in the first quarter compared to their previous estimate of 1.7%. Barclays economists lowered their estimate to 1.1% from 1.5%.

It is still possible that consumer spending and other aspects of the economy start picking up before the quarter is out. With the emergence of a new global risk in China's coronavirus outbreak, though, people may if anything be a bit less apt to spend (https://www.wsj.com/articles/ask-a-doctor-of-economics-about-coronavirus-11580990402) in the months ahead, while businesses' caution may only continue. The stock market might be going up. For now, it doesn't look as if the economy is following along.

Write to Justin Lahart at justin.lahart@wsj.com (mailto:justin.lahart@wsj.com)

-Justin Lahart; 415-439-6400; AskNewswires@dowjones.com


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  02-14-20 1826ET
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