According to the US Census Bureau, retail sales for the month of January fell around 0.8% month-over-month compared to an estimated 0.2%. The decline for January was the largest since March 2023. The drop in sales has many on Wall Street questioning as to whether or not the theme of consumer resiliency is losing steam.
Mastercard Economics Institute Chief US Economist Michelle Meyer joins Yahoo Finance to discuss consumer resiliency, January retail numbers, and how consumer habits may change whenever the Federal Reserve opts to cut interest rates.
Meyers outlines which sectors that rate cuts would help ease pressures:
"It's going to provide us support for those categories that are more interest rate sensitive. So, even think about today this morning, you've got retail sales, but we also got the home builder confidence survey, which picked up, and has been rising now for the last several months, which shows that home builders are getting more confident about the fact that interest rates have come down. There's still a low level of supply of homes, and they are starting to plan for greater construction and upturn in that cycle. So, an easing of monetary policy does provide support for the broader economy."
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Editor's note: This article was written by Nicholas Jacobino
Video Transcript
RACHELLE AKUFFO: So Michelle, as we continue to see consumers, as you mentioned in the note here, balancing prices and priorities, how does this change then as we perhaps will at some point later on in this year see a Fed rate cut kick in?
MICHELLE MEYER: Well, a Fed rate cut would be very helpful, of course, in terms of thinking about how much money they have to put towards debt service. So as the Fed starts to ease, cut interest rates, it's going to provide a support for those categories that are more interest rate sensitive.
So even think about today this morning, you got retail sales, but we also got the Homebuilder Confidence Survey, which picked up and has been rising now for the last several months which shows that homebuilders are getting more confident about the fact that interest rates have come down, there's still a low level of supply of homes, and they are starting to plan for greater construction and upturn in that cycle.
So an easing of monetary policy does provide support for the broader economy. And I would argue probably the most important factor to dictate how the consumer affairs this year is really the health of the labor market, which is holding up really nicely.