Icing retail sales

INDICATOR: January Retail Sales and Weekly Jobless Claims

KEY DATA: Sales: -0.4%; Excluding Vehicles: 0.0%/ Claims: 339,000 (up 8,000)

IN A NUTSHELL: "Is anyone really surprised that the rotten weather caused shoppers to abandon the malls in droves?"

WHAT IT MEANS: Retail sales went nowhere in January as households went nowhere in the snow and cold. We knew the report would be weak as vehicle demand had eased from the December pace so the focus was on the potential softness of other purchases. Clearly, sales of most things were weak. The only areas where people went out and bought goods were food stores, as they stocked up for the storms, and building supplies, as they loaded up on shovels and salt. Sales at appliance and electronics stores increased, which may have been for the not-so-Super Bowl. Otherwise, they bought nothing and didn't even shop online much. Purchases of gasoline rose but that looks like it was driven by price increases not more driving.

Jobless claims rose last week, but what the weather is doing to the labor market is anyone's guess. For some, it means they cannot get to work but that doesn't necessarily lead to layoffs. For others, such as landscapers who double as snowplowers in the winter, they are making it like crazy. How that all translates into jobless claims is impossible to determine, so the conclusion is that we should not jump to any conclusions.

MARKETS AND FED POLICY IMPLICATIONS: The insane winter (I am looking out at about ten inches of snow right now) has created enormous uncertainties about the state of the economy. Consumers are hunkering down and when they get the snow removal and heating bills, they will likely scream. We may not have had much retail spending but you can bet that the money going to utilities spiked in January. That shows up in the services component of consumption so a negative retail report doesn't necessarily mean a weak consumption number. The high bills, however, don't bode well for spending in February or March. Of course, traders have great trouble thinking past the headline so the markets may not like either the retail sales or jobless claims data. But as Fed Chairman Yellen made it clear, the data are uncertain and the Fed is still expecting growth to improve. Unfortunately, we may not know for months what is the true condition of the economy.