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December US retail sees biggest drop in nearly 10 years
[WASHINGTON] Americans' retail spending unexpectedly took its biggest tumble in nearly a decade during the key holiday shopping period, government data showed on Thursday.
While 2018 overall was a strong year and much of the decline was due to falling petrol prices, the sudden frugality of the US consumer was a jolting reminder that cracks could be beginning to show in the world's largest economy.
The news sent Wall Street into the red, with stocks closing the day mostly lower, and it could weigh on estimates of GDP growth in the year's final quarter. The auto sector was a bright spot, however.
For the month of December, retail spending tallied at US$505.8 billion, seasonally adjusted, a 1.2 per cent dip from the previous month, marking the largest month-to-month decrease since September 2009.
Economists had been expecting an increase of 0.2 per cent.
The Commerce Department data, which had been delayed by the record five-week government shutdown, were held down by nose-diving sales at gasoline stations, where fuel prices have fallen sharply in recent months.
But consumers also held off spending at online retailers, bars and restaurants and department stores as well as at furniture and clothing outlets.
The level followed a downward revision for November but still put sales up 2.3 per cent above December 2017.
December also had a Wall Street rout and economists say tumbling stock prices can make consumers wary of spending freely.
The National Retail Federation said Thursday that holiday shopping, which strips out auto and fuel sales, was up 2.9 per cent over 2017 - but this was still well below October forecasts for a 4.3-4.8 per cent rise in sales.
NRF President Matthew Shay said that "it appears that worries over the trade war and turmoil in the stock markets impacted consumer behaviour more than we expected."
Federal Reserve Governor Lael Brainard said Thursday the retail numbers were also a reminder that risks to US economic growth - which so far remains robust - were growing.
"It certainly adds to a story we want to take on board that there's downside risks at the same time we're seeing pretty good numbers," she told CNBC.
She noted slowing economic growth in China and Europe, tightening US financial conditions as well as Brexit negotiations - strongly suggesting the Fed will hold off raising rates for the near future.
But she cautioned against taking "too much signal" from a single month of retail data and said the United States still had strong job creation.
With cheap fuel, auto sales were unscathed: sales at motor vehicle and parts dealers were up one per cent over November.
But excluding the volatile auto sector, sales were down an even weaker 1.4 per cent over November.
"These numbers are astonishing," Ian Shepherdson of Pantheon Macroeconomics said in a client note, adding that the figures were not consistent with recent Redbook chain store survey results.
The "wild" numbers are likely to be revised upward and probably do not point to a new trend, he added.
"The consumer is no longer enjoying tax cuts or falling gas prices but that's no reason to expect a rollover."