US retail sales fell more than expected in February amid bitterly cold weather across the country, but a rebound is likely as the government disburses another round of pandemic relief money to mostly lower- and middle-income households.
The harsh weather also took a bite out of production at factories last month, with the deep freeze in Texas and other parts of the South putting some petroleum refineries, petrochemical facilities and plastic resin plants out of commission.
The setback is probably temporary.
Stronger economic growth is expected this year, thanks to massive fiscal stimulus and an acceleration in the pace of vaccines, which should allow for broader economic re-engagement, even as new Covid-19 cases are starting to creep up.
Federal Reserve officials, who started a two-day meeting on Tuesday, are likely to focus on the underlying economic strength, expectations of higher inflation and a steadily recovering labor market.
"With healthier and warmer days nearing, and generous stimulus checks on their way, consumers are poised to shake off the winter chills," said Lydia Boussour, lead U.S. economist at Oxford Economics in New York.
"This year, we expect the combination of an improved health situation and generous fiscal stimulus to fuel a consumer boom for the history books."
Retail sales dropped by 3.0% last month, the commerce department said.
But data for January was revised sharply up to show sales rebounding 7.6% instead of 5.3% as previously reported.
Economists polled by Reuters had forecast retail sales falling only 0.5% in February.
Unseasonably cold weather gripped the country in February, with deadly snow storms lashing Texas.
The decline in sales last month also reflected the fading boost from one-time $600 checks to households, which were part of nearly $900 billion in additional fiscal stimulus approved in late December, as well as delayed tax refunds.
The broad-based decrease was led by motor vehicles, with receipts at auto dealerships dropping 4.2%.
Sales at clothing stores fell 2.8%.
Consumers also slashed spending at restaurants and bars, leading to a 2.5% drop in receipts.
Sales at restaurants and bars decreased 17% compared to February 2020.
Receipts at electronics and appliance stores dropped 1.9% and sales at furniture stores tumbled 3.8%.
There were also big declines in sales at sporting goods, hobby, musical instrument and book stores.
Receipts at food and beverage stores were unchanged.
Sales at building material stores decreased 3.0%, while online retail sales plunged 5.4%.
