US retail sales post largest decrease since 2009
By Lucia Mutikani - Feb 16th, 20:38
US retail sales recorded their biggest drop in more than nine years in December as receipts fell across the board, suggesting a sharp slowdown in economic activity at the end of 2018.
The economy’s outlook was further dimmed by other data showing an unexpected increase in the number of Americans filing claims for unemployment benefits last week.
That pushed the four-week moving average of claims to a one-year high, an indication that job growth was moderating.
There was also little sign of inflation in the economy, with producer prices dropping in January for a second straight month.
Moderate inflation and softening domestic demand support the Federal Reserve’s pledge to be “patient” before raising interest rates further this year.
“This suggests that the word ‘patience’ will be in the Fed’s vernacular for some time,” said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto.
The commerce department said retail sales tumbled 1.2%, the largest decline since September 2009 when the economy was emerging from recession. Data for November was revised slightly down to show retail sales edging up 0.1% instead of gaining 0.2% as previously reported.
Economists polled by Reuters had forecast retail sales increasing 0.2% in December. Retail sales in December rose 2.3% from a year ago.
The December retail sales report was delayed by a 35-day partial shutdown of the federal government that ended on January 25. No date has been set for the release of the January retail sales report, which was scheduled for publication on Friday.
The plunge in retail sales came amid a sharp stock market sell-off and drop in consumer confidence in December. The longest government shutdown could also have undercut retail sales.
Excluding cars, petrol, building materials and food services, retail sales dropped 1.7% in January after an upwardly revised 1.0% surge in November. These so-called core retail sales correspond most closely with the consumer spending component of GDP. They were previously reported to have jumped 0.9% in November.
December’s sharp drop in core retail sales suggested a moderation in the pace of consumer spending in the fourth quarter. Consumer spending, which accounts for more than two-thirds of the US economy, increased at a 3.5% annualised rate in the July-September quarter.
GDP growth estimates for the fourth quarter are at about 2.7% but could be revised lower in the wake of the downbeat retail sales report. The economy grew 3.4% in the July-September period.
US treasury prices rose on the data, while the dollar fell to session lows against a basket of currencies. US stock index futures trimmed gains.
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