US Retail Sales Preview: Forecasts from six major banks, consumer spending likely bounced

We expect retail sales to rebound a strong 0.8% MoM in February following January's retreat of a similar magnitude. Volatile auto and gasoline stations sales will likely boost growth, with the control group also acting as a key driver as it recovers from last month's 0.4% contraction. Indeed, we project an above-consensus 0.5% MoM gain for the category. Furthermore, we forecast sales in bars/restaurants – the report's only services component – to decline for the first time in a year.

Judging from an increase in auto sales, motor vehicles and parts dealers could have contributed positively to the headline figure. Outlays at gasoline stations may also have increased, reflecting higher pump prices. And with the return of milder weather, it would not be surprising to see a number of other sectors rebound from their January declines, underpinning a 1.1% rise in headline sales. Ex-auto outlays could have been a tad weaker, advancing 0.8% month on month. 

Consumer demand is still strong, but we expect a 0.7% increase in US retail sales on Thursday after the CPI report. This will largely be a result of higher gasoline prices and will not fully recover from the 0.8% drop in January.

After a weaker retail sales report in January partly driven by seasonal adjustment issues, we expect a rebound in February retail sales by a strong 1.0% MoM with the main drivers being auto sales. Meanwhile, retail sales excluding autos and gasoline are expected to rise by 0.5% MoM and for control group sales to also increase at a similar pace by 0.4% MoM. For the quarter, overall consumption is still on track to continue growing but at a somewhat slower pace than during Q4 2023. Consumption should still be supported in the near term as long as the US labor market holds up well, but we see risks for a more significant weakening in the labor market and activity this year.

Consumers started the year on shaky footing. Retail sales slipped 0.8% and broader inflation-adjusted personal spending slipped 0.1% in January. Even as we anticipate a moderation in spending this year, we believe the January slowdown somewhat overstates the near-term pullback in consumption. Households are still benefiting from a real income tailwind that should remain supportive of spending in the near term. We expect to see a rebound in February spending and forecast retail sales advanced 0.8%. Some strength in retail sales will come from autos. Previously released data on vehicle unit sales suggest a rebound in sales after a pullback in January, which should translate to a decent lift for the headline figure. After excluding motor vehicle sales, we anticipate retail sales rose a more modest but still strong 0.4%.

After a pullback in January which was also perhaps influenced by bad weather, we expect the US consumer to bounce back in February, with the control group of retail sales growing by 0.4% in the month. High frequency credit card suggests that retail consumption should rebound in the month. Firm job gains and strong real wage growth, combined with a shift towards goods consumption, should continue to support strong demand for retailing.