Retail Sales Decline While Manufacturing Shows Signs of Improvement and Jobless Claims Drop

January witnessed a noticeable decrease in retail sales, which followed the strong performance seen during the holiday season at the end of 2023. This downturn comes as a sharp contrast to the flurry of consumer spending recorded in December.

Further economic data released on a Thursday morning provided a mixed picture. While retail sales faltered, manufacturing is showing signs of a comeback with positive survey results from New York and the third Federal Reserve District, also known as the Philadelphia Fed. In a concurrent positive trend, the number of new jobless claims appears to be on the decline.

Details on Economic Data

According to reports, monthly retail sales fell by 0.8% compared to the previous month, contrasting with the 0.4% increase seen in December, which was also revised downwards. Predictions had suggested a smaller decline of just 0.1%. Even when examined on a yearly scale, retail sales only inched up by 0.6%, a significant drop from the robust 5.3% growth rate observed in December.

Auto sales excluded, retail figures contracted by 0.5% over the month, reflecting a more pronounced slowdown from the 0.6% gain from December, yet this fall was in line with the projected 0.2% decrease. Manufacturing data brought more encouraging news, with the New York Empire State Manufacturing Index rising to a negative 2.4 in February, a stark improvement from the deeply negative 43.7 of December and surpassing consensus estimates that forecasted a negative 13.7.

The manufacturing outlook is further bolstered by the Philly Fed Manufacturing Index, which climbed to a positive 5.2 points in February from December’s negative 10, outdoing expectations of a negative 8. There's also positive movement in unemployment claims, which dropped to 205,000 compared to 212,000 the week prior. Analysts had anticipated an increase to 220,000, and hence, the actual figures present an element of relief.

Market Responses

Before the release of this assortment of economic data, traders had anticipated a total of a one-percentage-point reduction in interest rates by December 2024, including an initial cut of 25 basis points by July.

The S&P 500 Index, which is represented by the SPDR S&P 500 ETF Trust (SPY), experienced a positive closure at 5,000 points, a rise of 1% on Wednesday, succeeding a previous day’s fall of 1.4%. Ahead of Thursday’s trading session, futures for both the S&P 500 and Nasdaq 100 showed marginal increases.

retail, manufacturing, jobless