WASHINGTON (AP) — U.S. retail sales dropped sharply last month, in part because cold weather kept more Americans indoors, denting sales at car dealers and most other stores.
Retail sales fell 0.9% in January from the previous month, the Commerce Department said, after two months of healthy gains. It was a much bigger drop than economists expected and the biggest decline in a year.
The average temperature in January was the lowest since 1988, according to Pantheon Macroeconomics, and was particularly disruptive in the more temperate South. Devastating fires in Los Angeles may have also impacted spending.
The data does not show that Americans rushed to buy goods in January to get ahead of President Donald Trump's proposed tariffs, as some analysts had expected. However, sales were revised higher for December. Many consumers may have just cut back in January after splurging during the holiday season.
The tail-off in sales may provide some measure of reassurance for the Federal Reserve, after a very hot read on inflation for January, that the economy may not be overheating.
And the decline in retail sales indicates that the economy, while still expanding, will grow more slowly in the first three months of this year. It grew at a 2.3% annual rate in last year's final quarter.
Sales plummeted 2.8% last month at auto dealers and slumped at furniture stores, home and garden centers. Even in the usually strong online retail sector saw a 1.9% decline. Sales rose at general merchandise stores, a category that includes big retailers like Walmart and Target, and at restaurants and bars.
In addition to cold weather, the sales decline could in part point to fading consumer confidence as was reflected in a pair of recent surveys by the Conference Board and University of Michigan. Still, hiring and wage growth have been steady, suggesting the economy is still expanding. Last week the government reported that the unemployment rate fell for the second straight month to a low 4%.
Inflation did tick higher last month despite the Federal Reserve's efforts to cool prices through higher interest rates. The cost of groceries jumped in January from the previous month, pushed higher by soaring egg prices. Rising costs at the grocery store is exacting a toll on Americans.
Retail chains that have struggled are being forced to cut costs and close underperforming locations.
One of those chains, Joann, filed for Chapter 11 bankruptcy protection last month for the second time in a year and said this week it would close about 500 locations, more than half of its stores operating in the U.S.
The owner of surfer and skater-inspired labels like Quiksilver, Billabong and Volcom filed for bankruptcy protection last week. That company, Liberated Brands, also plans to shutter stores.
The environment for all retailers may grow more perilous as Trump steps up tariff threats, which could lead to higher prices. Trump said Thursday he would soon impose “reciprocal” tariffs on countries that levy large duties on U.S. goods exports. Trump has already added 10% import taxes on goods from China, and has said he will place 25% tariffs on all steel and aluminum imports.
David French, executive vice president of the National Retail Federation, warned the import taxes could raise prices for consumers.
“While we support the president’s efforts to reduce trade barriers and imbalances, this scale of undertaking is massive and will be extremely disruptive to our supply chains," French said Thursday. “It will likely result in higher prices for hardworking American families and will erode household spending power.”
Retail executives say that it’s hard to plan given the fluidity of the tariff policies under the Trump administration.
Kim Tobman, CEO of Bouqs, an online floral retailer based in Marina del Ray, California, said most of her vases come from China, and that the 10% increase wasn’t as bad as she expected. She doesn’t expect to raise prices, but she is considering Vietnam, Indonesia and other areas to source vases.
“We feel at this moment we can absorb it,” Tobman said.
She experienced the turbulence that comes with Trump’s shifting tariff plans last month during his showdown with Colombia, a massive exporter of flowers, after that nation initially refused to accept flights of deported migrants.
Trump swiftly announced a series of retaliatory measures, including a 25% tariff on Colombia exports to the U.S., with a threat it could escalate. Colombia is the largest flower exporter to the U.S and represents a big chunk of sourcing for Bouq’s floral arrangement, Tobman said. The Colombian government eventually agreed to Trump’s demands, and the tariffs never materialized.
The mighty heft of Amazon is pulling the U.S. stock market higher. The S&P 500 rose 0.6% Friday, erasing some of its slump from the day before and pulling closer to its all-time high set on Tuesday. The index is on track to close a third straight winning week and a sixth straight winning month, which would be its longest monthly winning streak since 2021. The Dow Jones Industrial Average added 65 points, and the Nasdaq composite climbed 1.1%. Amazon led the way after delivering a much bigger profit than analysts expected. Treasury yields eased a bit in the bond market.
President Donald Trump said he has decided to lower his combined tariff rates on imports of Chinese goods to 47% after talks with Chinese leader Xi Jinping on curbing fentanyl trafficking.
The Federal Reserve cut its key interest rate Wednesday for a second time this year as it seeks to shore up economic growth and hiring even as inflation stays elevated. The move comes amid a fraught time for the central bank, with hiring sluggish and yet inflation stuck above the Fed’s 2% target. Compounding its challenges, the central bank is navigating without much of the economic data it typically relies on from the government. The Fed has signaled it may reduce its key rate again in December but the data drought raises the uncertainty around its next moves. Fed Chair Jerome Powell told reporters that there were “strongly differing views” at the central bank's policy meeting about to proceed going forward.
The Federal Reserve will almost certainly cut its key interest rate on Wednesday and could signal it expects another cut in December as the central bank seeks to bolster hiring. A cut Wednesday would be the second this year and could benefit consumers by bringing down borrowing costs for mortgages and auto loans. Since Fed chair Jerome Powell strongly signaled in late August that rate cuts were likely this year, the average 30-year mortgage rate has fallen to about 6.2% from 6.6%. Still, the Fed is navigating an unusual period for the U.S. economy and its future moves are harder to anticipate than is typically the case.
Stocks are rallying toward more records ahead of a week packed with potentially market-moving events. The S&P 500 rose 1% Monday. The Dow Jones Industrial Average added 224 points, and the Nasdaq composite jumped 1.7%. Stocks also climbed in Asia ahead of a meeting on Thursday between the heads of the United States and China. The hope is that the talks could clear rising tensions between the world’s two largest economies. This upcoming week will feature profit reports from some of Wall Street's most influential companies and a meeting by the Federal Reserve on interest rates. Gold fell back toward $4,000 per ounce.
U.S. and Chinese officials say a trade deal between the world’s two largest economies is drawing closer. The sides have reached an initial consensus for President Donald Trump and Chinese leader Xi Jinping to aim to finalize during their high-stakes meeting Thursday in South Korea. Any agreement would be a relief to international markets. Trump's treasury secretary says discussions with China yielded preliminary agreements to stop the precursor chemicals for fentanyl from coming into the United States. Scott Bessent also says Beijing would make “substantial” purchases of soybean and other agricultural products while putting off export controls on rare earth elements needed for advanced technologies.
Some seniors say the Social Security Administration's cost-of-living adjustment won’t help much in their ability to pay for their daily expenses. The agency announced Friday the annual cost-of-living adjustment will go up by 2.8% in 2026, translating to an average increase of more than $56 for retirees every month. Eighty-year-old Florence, South Carolina, resident Linda Deas says it does not match the current "affordability crisis.” The benefits increase will go into effect for Social Security recipients beginning in January. Friday’s announcement was meant to be made last week but was delayed because of the federal government shutdown. Recipients got a 2.5% COLA boost in 2025 and a 3.2% increase in 2024.
Wall Street is heading for records after an update said U.S. households are feeling a bit less pain from inflation than feared. The S&P 500 climbed 1% Friday and was on track to top its all-time high set earlier this month. The Dow Jones Industrial Average jumped 529 points, and the Nasdaq composite rose 1.3%. Both are also heading toward records. The inflation data could clear the way for the Federal Reserve to keep cutting interest rates in hopes of helping the slowing job market. A strong earnings reports from Ford Motor and continued gains for AI stars also drove stocks higher.
Federal Reserve Chair Jerome Powell says that a sharp slowdown in hiring poses a growing risk to the U.S. economy.
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