January’s Dueling Data: Retail Sales and Industrial Production

Last week featured a case of dueling US data: January’s retail sales and industrial production (IP). Interestingly, similar variables affected both datasets, with one seemingly weighing on shoppers while simultaneously boosting an IP industry group. In our view, this illustrates why investors benefit from viewing the data holistically, taking both short- and long-term trends into account.

Retail sales started 2025 on a down note, falling -0.9% m/m in January—much worse than expectations for a flat month (0.0%).^[i] Gas stations and food and beverage sales led (both up 0.9% m/m), but 9 of 13 retail industries contracted, with sporting goods (-4.6%) and auto parts (-2.8%) down most.^[ii] Even excluding the volatile motor vehicles and parts and gas station categories, sales slipped -0.5% m/m.^[iii] On the flipside, industrial production rose 0.5% m/m.^[iv] Consumer goods output (0.8% m/m) contributed as production in nondurables outweighed durables’ decline.^[v]

The generally measured reaction to the reports leaned more dour than optimistic. Some wondered if the worse-than-anticipated drop in retail sales indicated a broader weakening in consumer spending. Others worried IP’s recent strength could be fleeting, especially if domestic manufacturers face tariffs from other countries responding to the Trump administration’s levies.

But January’s numbers reflected some one-off, passing distortions—like weather. According to the National Centers for Environmental Information, 2025’s was the coldest January since 1988, with an Arctic airmass reaching as far south as southern Florida (leading to a record 10 inches of snow in the Florida Panhandle).^[vi] While some economists blamed frigid weather for dampening shopping, January’s below-average temperatures also spurred demand for heating—the primary reason behind IP’s Utilities index’s 7.2% m/m jump, its biggest rise in three years.^[vii]

Auto industry developments also skewed January data. On the retail sales front, automobile and other motor vehicles sales fell -3.0% m/m.^[viii] Auto industry experts cited some expected reasons, including the aforementioned weather, seasonality (January is historically a low-volume month for auto sales) and some anticipated pullback after car dealer incentives pulled demand into December. But political uncertainty may have weighed on sales, too (e.g., potential tariffs and the possible ending of electric vehicle subsidies).

As for heavy industry, manufacturing—roughly three-fourths of IP—slipped -0.1% m/m due to a -5.2% drop in the motor vehicles and parts index. Excluding autos, factory output rose 0.2%.^[ix] While weather and political uncertainty may have also contributed to January’s weakness, auto production is volatile historically. Last month may just reflect some usual short-term bounciness. (Exhibit 1)

Exhibit 1: Motor Vehicles and Parts Production, January 2022 – January 2025

Source: St. Louis Federal Reserve, as of 2/18/2025.

January’s details illustrate why we encourage investors to look at both short- and longer-term trends. It is easy to get hung up on the latest headline growth rate, but that usually doesn’t tell the whole story. By reviewing the relevant context—in this case, the underlying subcomponents as well as the data’s longer-running trend—we see retail sales’ January dip is an anomaly in a generally expansionary past three years. (Exhibit 2) Meanwhile, industrial production has been much choppier over that same stretch, though heavy industry (and manufacturing in particular) has shown some green shoots recently. (Exhibit 3)

Exhibit 2: Retail Sales, January 2022 – January 2025

Source: FactSet, as of 2/18/2025.

Exhibit 3: Industrial Production, January 2022 – January 2025

Source: FactSet, as of 2/18/2025.

Now, these widely watched data won’t tell you how the US economy will fare for the rest of the year. They also have further limits. For example, retail sales aren’t inflation adjusted and reflect just a portion of total consumer spending, while manufacturing is a small piece of total US economic output. But overall, these data haven’t deviated much from longer-running trends, a couple of weather-driven and industry-specific speedbumps aside. That indicates to us the fundamentals underpinning US growth in 2024 continued in early 2025—a fine backdrop for US (and global) markets.