US Retail Sales Preview: Forecasts from 10 major banks, will the US consumer take a break?

We expect the retail sales to grow at 0.3% MoM, down from +0.6% in December.

Retail sales are expected to register more moderate growth in January (0.2% MoM), paying back for the burst of strength at the end of 2023.

Retail sales are likely to be soft, given that auto sales numbers already published were poor. Bad weather has certainly played a part, but 20+ year high borrowing costs for credit cards, car loan and personal loans are not helping. There is also growing evidence suggesting that pandemic era accrued excess savings will be supportive for spending.

We expect January’s US retail sales report to show a 0.5% decline from December led by a 7% drop in auto sales and a 2% fall in gasoline prices MoM. That marks the largest decline since March last year. Another surge in jobs in January (353K) and acceleration in wage growth means household incomes are still strong but the household saving rate continues to run below pre-pandemic levels.

Motor vehicles and parts dealers and outlays at gasoline stations could have contributed negatively to the headline figure. Meanwhile, other categories could have suffered from bad weather and recorded losses, notably food services. All told, we expect total sales to have contracted 0.5%. Ex-auto outlays could have been a little less bad, falling 0.4% MoM.

We look for soft headlines and even see the potential for a negative. Gasoline prices fell 2.5% in January on average, which should be partially offset by a volume increase, but we still anticipate roughly a 1.0% MoM drop in gasoline sales. For most other spending categories, we look for trend increases, which should lift the ex-transportation measure by 0.4% MoM.

We forecast retail sales to advance 0.1% in January and 0.3% when excluding autos. As the year progresses, we expect to see more of a moderation in spending emanating from a slowing jobs market. The unique factors of excess liquidity and easy access to cheap credit are tales of the past in the story of consumption.

We expect the control group of retail sales to moderate but remain solid with growth of 0.3% MoM and the headline advanced reading should be 0.2%. The underlying strength in the labor market combined to normalizing inflation has meant real income growth has accelerated. Other forces are afoot too to support consumption. Housing unaffordability, work from home and rising household wealth could be pushing consumers to spend more on durables.

We expect retail sales to retreat for the first time since October (TD: -0.3% MoM), following a strong 0.6% gain in December. Volatile auto sales will likely prove to be a major culprit behind weaker growth, with control group sales also acting as a drag. We look for a small 0.1% MoM decline in the latter. In addition, we project sales in bars/restaurants to move lower, as services spending likely started 2024 on a weaker footing.

US January Retail Sales – Citi: -0.6%, prior: 0.6%; Retail Sales ex Auto – Citi: -0.2%, prior: 0.4%; Retail Sales ex Auto, Gas – Citi: -0.2%, prior: 0.6%; Retail Sales Control Group – Citi: 0.1%, prior: 0.8%. Retail sales have been surprising to the upside for several months in a row and the rebound in real goods demand has been stronger than expected. Goods and services have been contributing almost equally to growth over the last couple of quarters. Consumption overall should remain generally supported as long as the labor market holds up and incomes are increasing but we expect a softer retail sales print in January. Seasonal adjustment dynamics also imply some downside risk to the January retail sales this year as they expect sales to decline by less in non-seasonally adjusted terms than they did during the prior year.