WASHINGTON (Reuters) - U.S. consumer spending slowed further in January, with sales at clothing stores declining by the most since 2009, a trend that could raise concerns about the economy’s ability to continue expanding at a moderate pace.

FILE PHOTO: A customer counts her money at the register of a Toys R Us store on the Thanksgiving Day holiday in Manchester, New Hampshire November 22, 2012. REUTERS/Jessica Rinaldi/File Photo

The economy's outlook was also dimmed by other data on Friday showing industrial production decreased for a second straight month in January as unseasonably mild weather depressed demand for utilities, and Boeing BA.N suspended production of it troubled 737 MAX plane. The reports prompted economists to predict weaker economic growth in the first quarter.

They followed on the heels of Federal Reserve Chair Jerome Powell’s remarks to lawmakers this week that the “economy is in a very good place, performing well.” The U.S. central bank last month left interest rates steady and is widely expected to keep monetary policy on hold this year after it reduced borrowing costs three times in 2019.

“The soft patch for consumer spending entered its sixth month in January,” said Michael Feroli, an economist at JPMorgan in New York. “With business investment spending still missing in action the economy will need a more buoyant consumer to register above-trend growth.”

Retail sales excluding automobiles, gasoline, building materials and food services were unchanged last month. Data for December was revised down to show the so-called core retail sales rising 0.2% instead of jumping 0.5% as previously reported. Core retail sales correspond most closely with the consumer spending component of gross domestic product.

Consumer spending accounts for more than two-thirds of U.S. economic activity. Economists polled by Reuters had forecast core retail sales rising 0.3% last month.

The unchanged reading in core retail sales suggested a further loss of momentum early in the first quarter after consumer spending grew at a 1.8% annualized rate in the October-December quarter. That was a step-back from the 3.2% pace logged in the third quarter.

The economy grew 2.3% in 2019, slowing from 2.9% in 2018.

The slowdown in consumer spending, together with a deepening downturn in business investment and weak manufacturing cast a shadow on the longest economic expansion on record, now in its 11th year. The economy also facing risks from the deadly coronavirus, which has prompted economists to downgrade their growth estimates for the Chinese economy.

In a separate report on Friday, the Fed said industrial production fell 0.3% in January after decreasing 0.4% in December. Industrial output was pulled down by a 4.0% drop in utilities production. A 7.4% plunge in the production of aerospace and miscellaneous transportation equipment also weighed on industrial output last month.

U.S. stocks were mixed as investors digested the weak data and worried about the coronavirus epidemic’s impact on the global economy. The dollar was steady against a basket of currencies, while U.S. Treasury prices rose.

BOEING DRAG

Boeing last month suspended production of the MAX plane, which has been grounded since last March following two deadly crashes in Indonesia and Ethiopia. Economists estimate Boeing’s biggest assembly-line halt in more than 20 years could slice at least half a percentage point from first-quarter GDP growth.

Economists also expected the coronavirus to disrupt supply chains for manufacturers, especially electronic goods producers, though higher inventories at factories could soften some of the hit on industrial output.

“While U.S. supply chains are more integrated with China today than they were a few decades ago, inventories in the manufacturing sector are relatively high,” said Sarah House, a senior economist at Wells Fargo Securities in Charlotte, North Carolina. “That said, it can often only take a single out-of- stock part to disrupt production. Therefore, we would expect production to remain fairly weak the next couple of months.”

In the wake of Friday’s reports growth estimates for the January-March quarter ranged from as low as a 1.0% rate to as high as a 2.4% pace. The economy grew at a 2.1% rate in the fourth quarter, lifted by an improvement in the trade balance as imports declined sharply.

Consumer spending is slowing despite a strong labor market, which is steadily lifting wages. There is cautious optimism for some pick-up, with a third report on Friday showing the University of Michigan’s consumer sentiment index increased in early February. But higher consumer sentiment has not translated into robust spending in recent months.

In January, overall retail sales rose 0.3%, but data for December was revised down to show sales gaining 0.2% instead of climbing 0.3% as previously reported.

Sales were lifted by a auto purchases, which rebounded 0.2% after slumping 1.7% in December. Receipts at service stations fell 0.5%. Sales at electronics and appliance stores decreased 0.5%. Sales at building material stores jumped 2.1%, the most since last August, after rising 1.3% in December. Sales were likely buoyed by unusually warmer temperatures, which have boosted activity in the construction sector.

Receipts at clothing stores dropped 3.1% last month, the most since March 2009. Clothing retailers have been struggling with plummeting mall traffic as consumers opt for online shopping. Macy's M.N announced this month plans to close 125 of its least productive stores over the next three years and cut more than 2,000 corporate jobs.

Online and mail-order retail sales rose 0.3%. That followed a 0.1% dip in December. Receipts at furniture stores rose 0.6%. Americans boosted spending at restaurants and bars, with sales increasing 1.2%. But they cut back on spending at health and personal care stores. Spending at hobby, musical instrument and book stores edged up 0.1%.