US February Retail Sales Surprise 3% Drop... Treasury Yields Fall

Effect of $900 Cash Payment Ends

[Image source=AP Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] The U.S. Department of Commerce announced on the 16th (local time) that U.S. retail sales in February fell by as much as 3%.

This figure is significantly below the market forecast of a 0.5% decrease. January retail sales were revised upward from a 5.3% increase to a 7.6% increase.

Core retail sales, excluding automobiles, fuel, building materials, and food, also dropped by 3.5%. The expected figure was a 0.9% decrease. Core retail sales had increased by as much as 8.7% in the previous month. January core retail sales were also revised from an initial 6.0% increase.

This result is evaluated to show that the abnormal cold and heavy snowfall that hit the U.S. in February, along with the diminishing effect of the $600 cash payments provided by the U.S. government as part of economic stimulus measures, contributed to the decline.

Since the consumption sector accounts for two-thirds of the U.S. economy, experts and market participants consider retail sales results important.

CNBC explained that while the abnormal weather had some impact, the results also indicate that the consumption expansion driven by government cash payments cannot be sustained in the long term.

The U.S. government plans to provide $1,400 in cash per person through the recently implemented $1.9 trillion economic stimulus package. While the government expects this to stimulate the economy, there are forecasts that a significant portion of the public will use the funds for stock investments or savings.

Following the below-expectation February retail sales announcement, reflecting inflation concerns due to economic recovery, the yield on the U.S. 10-year Treasury note, which had stayed above 1.6%, slightly declined to 1.597%.

The U.S. Federal Reserve (Fed) will hold its Federal Open Market Committee (FOMC) meeting, a two-day monetary policy meeting, from today until the 17th. There is speculation that the Fed may revise its economic outlook and future interest rate projections after this meeting.