U.S. consumer spending barely rose in January as households cut back on purchases of a range of goods, suggesting the economy started the first quarter on a softer note.
Sluggish spending came despite cheap gasoline and a buoyant labor market, leaving economists to speculate that consumers were using the extra income to pay down debt and boost savings.
“There is a risk of a temporary soft patch for the economy as it is somewhat surprising the consumer has stopped spending their savings from gasoline prices,” said Chris Rupkey, chief financial economist at MUFG Union Bank in New York.
The Commerce Department said on Thursday retail sales excluding automobiles, gasoline, building materials and food services edged up 0.1 percent last month.
That followed a 0.3 percent drop in December and was below Wall Street’s expectations for a 0.4 percent increase.
The so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.
Overall retail sales slipped 0.8 percent in January, declining for a second straight month as falling gasoline prices undercut sales at service stations.
The soft core retail sales prompted Barclays to lower its first-quarter GDP growth estimate by three-tenths of a percentage point to a 2.2 percent annual rate. JPMorgan cut its estimate to a 2.5 percent rate from a 3 percent pace.
The economy grew at a 2.6 percent annual pace in the fourth quarter. However, inventory and trade data for December was below the government’s assumptions in the GDP report, suggesting growth could be revised to as low as a 1.8 percent rate.
U.S. financial markets were little moved by Thursday’s data, with attention focused on details of a ceasefire agreement between Russia and Ukraine and a surprise interest rate cut and bond purchasing program announced by Sweden’s central bank.