(Kitco News) - Gold prices are continuing to cling to the important $2,000 per ounce level after retail sales came in well below market expectations in January, while December’s print also saw a downward revision.
U.S. retail sales fell by 0.8% last month following a revised increase of 0.4% from 0.6% in December, according to the latest data from the U.S. Commerce Department. Economists' consensus calls projected a 0.1% drop in January’s headline number.
Core sales, which strip out vehicle sales, were down 0.6% last month, also far below market expectations of a 0.2% increase, and compared to December’s revised -0.4% reading.
Spot gold whipsawed in the minutes after the 8:30 am EST release, but quickly returned to trading within a few dollars of $2,000 per ounce. It last traded at $2,000.21, and is up 0.39% on the day at the time of writing.
Andrew Hunter, Deputy Chief U.S. Economist at Capital Economics, said the report shows that consumption growth is finally faltering.
"The 0.8% m/m fall in retail sales in January may partly reflect the unwinding of a previous weather-related distortion, but should temper recent suggestions of an economic resurgence," he said. "We continue to expect GDP growth to slow in the first quarter."
Hunter said the headline reading "wasn’t quite as bad as it looked since it included a 1.7% m/m fall in gasoline station sales, which was at least partly driven by lower prices," but he noted "an equal-sized decline in spending on motor vehicles which, based on the manufacturers’ unit sales data, will correspond to an even sharper fall in real consumption."
"The main surprise was in control group sales excluding autos, gasoline, building materials and food services, which fell by 0.4% m/m," he said. "That could partly reflect a reversal of the earlier boost to spending from December’s record-warm weather, with the start of January bringing snowstorms across much of the country. But that mainly appears to have hit sales of building materials, which plunged by 4.1% m/m and aren’t included in the control group total, and probably doesn’t explain the 0.8% m/m fall in online sales."
Looking ahead, Hunter said the report indicates significantly slower growth for Q1 2024.
"Overall, real consumption appears to have declined in January and, even allowing for a recovery over February and March, growth will slow sharply in the first quarter," he wrote. "The upshot is that Fed officials may not need to worry much longer about the possibility of continued economic resilience reigniting inflation."
