💰 6 Alarming Signs of a Slowing Economy You Need to Know! 📊

1. Retail Sales Take a Dip

Consumer spending dropped in January, signalling potential economic slowdowns ahead. Retail sales fell by 0.9%, missing the 0.2% decline forecast, while core retail sales fell 0.8%.

However, retail sales are highly seasonal, and not seasonally adjusted (NSA), they actually fell by 16.5% from December—a typical post-holiday decline—while remaining 4.8% higher year-over-year.

This suggests that while spending slowed, it was not necessarily out of line with historical patterns.

2. Consumer Spending—A Major Economic Indicator

Since consumer spending accounts for about two-thirds of U.S. economic activity, this downturn could indicate weaker growth for the first quarter of 2025. However, January’s retail sales always dip significantly from December’s record highs.

For example, department store sales plunged by 44.4% from December, but this is actually better than the past two years' declines of 46.0% and 48.4%, respectively.

For other key sectors:

• Auto sales: NSA fell 9.9% month-to-month, but year-over-year, they were up 6.8%.

• E-commerce: NSA sales fell 23.3% month-to-month, yet were still 3.8% higher than a year ago.

• Food & drinking places: NSA sales fell 6.9% from December, but were 6.9% higher than last year.

3. Market Reaction & Fed Rate Speculation

Following the report, stock market futures dipped slightly, and Treasury yields declined. Traders are now betting that the Federal Reserve may cut interest rates by June to counter slowing consumer demand.

Corporate economist Robert Frick pointed out that bad weather and an auto sales slump contributed to the decline. Additionally, while seasonal adjustments make the numbers appear weaker, they align with long-standing seasonal trends.

4. Inflation Remains Stubbornly High

Inflation is still above the Federal Reserve’s 2% goal, with the Consumer Price Index (CPI) rising 0.5% in January and an annual inflation rate of 3%.

However, wholesale prices showed some signs of softening, hinting that future consumer price increases may moderate.

5. Import & Export Prices on the Rise

The Bureau of Labor Statistics reported that import prices rose 0.3% in January, marking the highest jump since April 2024. On a yearly basis, import prices increased 1.9%, with fuel prices surging 3.2%. Meanwhile, export prices climbed 1.3%, suggesting global demand remains strong despite domestic spending concerns.

6. Final Thoughts

January’s economic indicators show mixed signals—while consumer spending slowed, much of this decline is seasonal and expected. Retail sales, when not seasonally adjusted, were actually higher than last year, despite winter storms and economic uncertainties. While stock market shifts and rising import/export prices suggest resilience in some areas, continued inflation and Federal Reserve policy will shape the outlook in the coming months. As always, January’s figures should be viewed with seasonal context in mind rather than as an immediate cause for alarm.

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