U.S. retail sales fell in February by the biggest amount in a year, indicating the main driver of the U.S. economy, consumer spending, had begun to slow even before coronavirus-containment measures began rippling through the economy.
The value of overall sales decreased 0.5% from the prior month after a 0.6% gain in January, Commerce Department figures showed Tuesday. The median estimate in a Bloomberg survey called for a 0.2% advance.
Sales in the “control group” subset, which some analysts view as a more reliable gauge of underlying consumer demand, were little changed, compared with projections for a 0.4% gain. The measure excludes food services, car dealers, building-materials stores and gasoline stations.
The report suggests consumers had already begun to scale back on spending before the number of coronavirus cases in the U.S. began accelerating. It’s not clear if the figures reflect any added boost from widespread supply stockpiling as Americans headed to grocery stores and online retailers to buy the essentials. Grocery store sales fell 0.1% after a 0.2% decline, the report showed.
The numbers starting from March on are likely to show a deep hit to many categories as conferences, restaurants and sports shut down across the nation.
Spending at automobile dealers fell 0.9%. Excluding automobiles and gasoline, retail sales dropped 0.2% from the prior month, compared with projections for a gain.
Personal-spending figures will offer a fuller picture of U.S. consumption in data due at the end of the month.
While discounters and grocers like Walmart, Target and Costco have seen long lines of customers wanting to stockpile groceries, many mall-based clothing stores have seen a drop-off in customer traffic.
Economists believe that the hit to consumer spending, which accounts for 70% of economic activity, will be enough to push the country into a recession.
“Disruptions from the coronavirus will bring the economy’s main engine (consumer spending) to a halt,” economists at Oxford Economics said in a research note. “Against this backdrop, a U.S. recession is now unavoidable.”
Nordstrom became the first department store chain to announce that it would temporarily close all 380 stores, including 116 department stores. It said it was calling off its annual financial guidance, noting a slowdown in consumer demand, particularly in areas impacted by the coronavirus.
Deborah Weinswig, CEO of Coresight Research, a global research firm, said that she now expects 15,000 stores to close in 2020, nearly double her forecast of 8,000 stores that she made earlier this year. She says she expects that retailers could be closed for three months, not just two weeks.
“We are in a sustained spending halt,” she said.