• Retail sales declined by 0.5% m/m in February, well below market expectations of 0.2% m/m. The miss was partly due to an upward revision in January to 0.6% from 0.3% previously.
  • Sales in relatively more volatile components were weak. In particular, sales at gasoline stations experienced the biggest decline since December 2018, dropping by 2.8% on the month. Building materials contracted by 1.3%, food services and drinking places by 0.5%, and motor vehicles and parts by 0.9%.
  • The story was slightly better for the control group, which excludes autos, building materials, gasoline stations and food services. This category of sales was flat in February, but was well below market expectations (+0.4%). Contractions in furniture and home furnishing (-0.8%) and clothing and accessories (-1.2%), were the main factors behind the weakness.

Key Implications

  • This was a weak report. Although it is now backward looking, it indicates that consumption was on wobbly footing prior to the coronavirus outbreak.
  • Indeed, much has changed in the first two weeks of March. COVID-19 made an aggressive landfall, infecting more than 2,000 people, and causing sudden stops in economic activity all around the country. The stock market has nose-dived and consumer confidence followed suit.
  • While retail sales may post an abnormal gain in March, due to households stocking up supplies in anticipation of quarantines, it is set to contract heavily in April as the coronavirus forces shut downs in restaurants, malls, and other retailers. We expect the pull-back in consumption will lead the economy into noticeable contraction in the second quarter of 2020.


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