Retail sales sluggish. Winter weather to blame?

Retail sales were sluggish in January as the economy surely felt the effects of wild winter weather. But certain trends in the retail sales report suggest the slowdown could extend beyond the winter months. 

Winter woes have repercussions beyond stranded commuters in the South, freezing temperatures in the Midwest, and regular flurries in the Northeast.They may have helped keep consumers from spending money. 

Retail sales dropped 0.4 percent from December to January, according to figures released Thursday by the Commerce Department. The report highlighted the ill effects of bad winter weather on shopping habits. But losses in key areas suggest the trend could extend into the milder months, which sets up the US for a potentially sluggish year.

Sizable losses were seen in several major industries, including automobiles, furniture, department stores, and restaurants. Grocery stores and electronics saw weak gains, while gas stations saw sizable gains.

Chris G. Christopher Jr., director of consumer economics at IHS Global Insight, says these patterns are likely due to the wild winter weather.

“Many households shied away from shopping malls, restaurants and automobile dealerships since they were not willing to brave the cold, ice and snow,” he writes in an e-mailed analysis. “For some retail channels such as building material and garden supply stores, inclement weather can be a double-edged sword. Unseasonably colder weather or snowstorms can slow down home improvement projects but it can also cause a flurry of Americans buying shovels, salt and power generators.”

Does that mean once the weather calms down, sales will go back up? Peter Newland, a US economist at Barclay’s Research, points out two details of the report that seem to suggest an uptick isn’t likely.

“Movements in some other components are more difficult to square with [weather] as a catch-all explanation--such as a drop in Internet sales (-0.3%) and a strong gain in building materials (1.4%),” he writes in an e-mailed analysis.

Barclays downgraded its Q4 GDP tracking estimate by .4 to 2.2 percent, and set its Q1 estimate also at 2.2 percent.

This being said, January sales are up 2.6 percent from this month in 2013, and have gained 3.4 percent more in the past three months than last year.

But growth will likely be slow. Both analysts say if the troublesome weather continues, February isn’t likely to fare much better. Even if there are gains, Mr. Christopher doesn’t anticipate much overall growth.

“Some of the spending that was delayed in January is likely to be pushed into the latter part of the first quarter – auto sales are a good example,” he writes. “However, we are not expecting much positive payback for restaurants. Unfortunately, the February retail sales report is looking like another bad weather story as well."