US retail sales unexpectedly fall the most in nine years

Published Thu, Feb 14, 2019 · 02:16 PM
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[WASHINGTON] US retail sales unexpectedly fell in December, posting the worst drop in nine years in a sign of slower economic momentum at year-end amid financial market turmoil and the government shutdown.

The value of overall sales fell 1.2 per cent from the prior month after a downwardly revised 0.1 per cent increase in November, according to Commerce Department figures released Thursday after a four-week delay due to the shutdown. That missed all economist estimates in a Bloomberg survey that had called for a 0.1 per cent gain.

Stock futures erased gains, Treasuries rose and the dollar fell, as the broad weakness across most sectors added to signs that US economic growth is cooling from prior quarters - potentially by more than projected. It may reinforce investor expectations that the Federal Reserve will hold off on raising interest rates this year amid concern about trade and global growth.

"These numbers are horrible," said Ward McCarthy, chief financial economist at Jefferies LLC. "It appears to contrast quite sharply with reports of Christmastime sales that were generally seen as quite healthy," and for the Fed, "rate normalization is on the back burner for a long time to come."

Excluding automobiles and gasoline, retail sales slumped 1.4 per cent, the biggest drop since March 2009, after a 0.5 per cent advance the previous month.

Sales in the "control group" subset, which some analysts use to gauge underlying consumer demand, also missed estimates with a 1.7 per cent decline, the biggest drop since the Sept 11, 2001, terror attacks. That followed a 1 per cent advance the prior month. The measure excludes food services, car dealers, building-materials stores and gasoline stations.

While the steep drop follows other data pointing to slower growth, it's at odds with figures showing a healthy job market and steady wage gains. The slump also may prove temporary as stocks have regained ground following the biggest December plunge since the Great Depression, and the government shutdown ended in late January.

All but two of 13 major retail categories showed a decline, with non-store retailers - which includes online stores - falling 3.9 per cent, the most since Nov 2008. The broad-based weakening reflected lower sales from clothing stores to and gasoline stations. Auto dealers and building materials stores were the only sectors to record increases.

December's drop is likely to hit estimates of consumer spending following the best back-to-back quarters of economic growth since 2014 and of consumer spending since 2015. Economists surveyed by Bloomberg before Thursday's data had forecast consumption to grow at a 3.4 per cent annualized rate in the fourth quarter and 2.4 per cent in the first three months of this year.

Filling-station receipts slumped 5.1 per cent, the report showed. The Commerce Department figures aren't adjusted for price changes, so the readings can reflect both fluctuating gasoline costs and sales.

Sales at automobile dealers rose 1 per cent in December after increasing 0.7 per cent in the previous month. Industry reports previously showed unit sales rose 0.6 per cent in December and fell 5.1 per cent in January.


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