January Retail Sales Disappoint, But Some Areas Shine

The headline January retail sales number released today, which showed a decline of -0.8 percent, seemed to be a bit of surprise to most given the enormous drop in fuel prices which was assumed to provide a boost to spending.  However, there are some meaningful differences in consumer spending trends.  For example gas stations got hit the hardest obviously, with sales tumbling over 23 percent from the prior year, but other areas, such as the awkwardly named "Food Service and Drinking Places" saw sales skyrocket by over 11 percent as the chart below from the Federal Reserve of St. Louis demonstrates.

What’s more, if consumers are not spending as much as expected on things like clothing and general merchandise, then perhaps the saved the extra funds for paying down debt.  And with real wages (adjusted for Inflation) continuing to grow as Cornerstone Macro suggests, having more money in the pockets of consumers is not such a bad thing.  Additionally, if you smooth the series out using a three month average,consumer spending appears likely to continue its trend higher.