U.S. retail sales fell significantly short of expectations in January

U.S. retail sales fell well below expectations in January, with severe weather and California wildfires largely contributing to the decline.

Retail sales dropped 0.9% last month, following an upwardly revised 0.7% increase in December, missing forecasts for a modest 0.2% decline.

Core retail sales, which exclude automobiles, gasoline, building materials, and food services—closely aligning with consumer spending in GDP calculations—fell 0.8% in January after a 0.8% rise the previous month.

The decline was somewhat anticipated, as markets adjusted following strong holiday shopping and four consecutive months of solid gains, partly fueled by preemptive buying ahead of tariff-related price hikes.

Despite the dip, U.S. household wealth remains at record highs, supporting consumer spending and wage growth. This adds to signs of continued economic recovery, following 2.3% GDP growth in Q4 2024, down from 3.1% in the previous quarter.

Following the data release, the dollar extended its decline against major currencies, with the dollar index hitting a two-month low and tracking its second consecutive weekly loss.