February retail sales and consumer prices rose at a slower pace compared to January. Some analysts have linked the moderation in spending to the delay in tax refunds by the Internal Revenue Service. The deceleration may also be a return to a moderate pace of growth following brisk gains in December and January. Either way, recent themes in both reports continued in the latest month.
Retail sales increased 0.1 percent in the latest month following a 0.6 percent jump in January and a 1.0 percent surge in December. Sales are up 5.7 percent from a year ago. The broader themes of shoppers spending on homes and autos, and doing more and more shopping online continued in the latest month.
Among the key components: Motor vehicle and parts sales fell 0.2 percent for the month though unit auto sales held at a 17.5 million annual rate in February. That is down from recent peaks but still a high level historically. The largest gain came from online retailers where sales rose 1.2 percent for the month and are up 13.0 percent from a year ago. Other strong performers were: Building materials stores (1.8 percent), furniture stores (0.7 percent), and health and personal care stores (0.7 percent).
The biggest decline came from electronics and appliance stores, down 2.8 percent. Smaller declines were seen in miscellaneous retailers (-0.8 percent), clothing retailers (-0.5 percent), sporting goods, books, and hobby stores (-0.4 percent), general merchandise stores (-0.2 percent), and restaurants (-0.1 percent).
The CPI report showed that energy continues to be the main source of volatility for consumer prices, but the most persistent source of price pressure is housing. The CPI for all types of shelter rose 0.3 percent in February and is up 3.1 percent from a year ago. The CPI for shelter is about one-third of the entire CPI. Some areas that had been consistent sources of price increases - medical care services, prescription drugs, and college tuition - have started to decelerate recently. Only time will tell if these trends continue or if these prices will begin to accelerate again.
The CPI for goods excluding food and energy – things like motor vehicles, apparel, household furnishings, recreational goods, and personal care items - were unchanged in February and are down 0.5 percent over the year. This category is about 20 percent of the total CPI and has risen at just a 0.1 percent annualized rate over the past 20 years.
These are just two of the many data reports that Fed officials will be considering when they make their decision on monetary policy today. The decision is expected to be announced at 2:00 p.m. with a press conference scheduled for 2:30 p.m. A rate increase is widely expected but the important message to watch for from the Fed members will be the pace of future rate increases and the anticipated neutral rate or stopping point for the current policy normalization cycle.