Consumers kept to their habits boosting purchases last month but the holiday season was slower than its initial reading giving the New Year a soft beginning.

Retail sales rose 0.3% in January as forecast but December's gain was dropped to 0.2% from 0.3%, reported the Commerce Department on Friday. Sales outside of automobiles also climbed 0.3% as expected and the December figure lost 0.1% on adjustment to 0.6%. 

Retail Sales

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The GDP consumption analog 'control group' or core retail sales missed its 0.3% prediction for January coming in flat and keeping to pattern the December result was more than halved to 0.2% from 0.5%. 

Retail Sales Control Group

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The neutral reading in core sales combined with the weaker December purchases suggest that despite the continuing strength in the labor market and wages, household spending may have shed momentum in the fourth quarter. Lower core sales may effect GDP which expanded at a 2.1% rate in the final quarter in its preliminary estimate. The second assay is due on February 27th. 

Federal Reserve Chairman Powell said the US economy was in "a very good place" in Congressional testimony this week.  The central bank moved to a neutral policy last October after reducing the fed funds rate by 0.75% last year to head off any US weakness from the global economic slowdown and the then unsettled US-China trade dispute.  The Fed's own rate projections have the monetary policy stable through the end of this year.  

Auto sales rose 0.2% in January after plunging 1.7% in December. Purchases at building material stores climbed 2.1% in January following December's 1.3% gain and represented about half of the January increase in overall sales. Warm weather likely facilitated the unusual winter increase. 

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