Low gas prices haven't been the windfall policymakers anticipated
The US February retail sales report is due on Tuesday at 8:30 am ET (1230 GMT) and it's a final, critical piece of economic data before the FOMC decision Wednesday.
At this time last year Federal Reserve members were touting the drop in oil prices as a very unambiguously positive factor for the US economy. They reasoned that consumers would spend whatever they saved on gasoline and it would add to growth.
The reality has been far different. The oil price collapse led to layoffs and job uncertainty in energy producing regions. Consumers paid down debt rather than spending.
In 2015, retail sales excluding autos, gas and building materials (this is the 'control group' which is the best indicator of the underlying trend), averaged just a 0.184% monthly rise. That's less than the average 0.2% rise in the CPI ex-food and energy. In other words, the pace of retail spending didn't even keep up with inflation.
What to expect in February
One of the biggest economic data surprises released this year was the December 2015 retail sales report. It's a critical month for consumer spending because of the holidays but it deeply undershot expectations as the control group fell 0.3%.
That was followed by a 0.6% rebound in January despite the turmoil in markets. In February, the jobs report was extremely strong and indications are that the US economy is improving. Still, markets and policymakers lack any kind of confidence in the trend and this report will be a major factor.
Here is what's expected from economists:
- Control group +0.2% m/m
- Overall sales -0.1%
- Ex autos -0.2%
- Ex autos and gas +0.2%
