Synopsis:

January US retail sales disappointed, falling 0.9% (vs. -0.2% expected), while the control group dropped 0.8% (vs. +0.3% expected). However, strong prior months and a resilient labor market suggest this is likely a temporary slowdown, rather than a shift in consumer behavior.

Key Points:

1. Broad-Based Decline in Sales:

   • Headline retail sales: -0.9% (vs. -0.2% expected).
   • Control group: -0.8% (vs. +0.3% expected).
   • Notable weakness in key discretionary categories, including online sales (-1.9% m/m).

2. December Revisions Partially Offset Weakness:

   • Upward revisions to December data softened the negative impact.

3. Longer-Term Consumer Strength Remains Intact:

   • Control group sales still 3.7% higher y/y, indicating robust consumer spending trends.
   • Labor market remains healthy, supporting future spending.

Conclusion:

Despite a sharp January pullback, CIBC sees no major warning signs for the US consumer. The labor market remains strong, and past spending momentum is intact, making this a likely temporary pause rather than a trend shift.