Retail Sales Drop In December

Fall Unforeseen By Economists

U.S. Retails Sales Report for DecemberU.S. retail sales retreated in December, posting their largest decline in 11 months as spending declined across the board. The Department of Commerce reported yesterday that last month’s retail sales dropped 0.9% – a fall unforeseen by economists, who had predicted a median 0.1% setback.

The reduction in consumer spending, which followed a 0.4% increase in November, occurred even as the national employment picture brightened and gas prices dropped precipitously. “Job gains, lower gasoline prices and increases in home and stock prices are positives for household spending. But consumers remain cautious in the wake of the Great Recession,” Stuart Hoffman and Gus Faucher, economists at PNC Financial Services Group, said in a note after the release.

The disappointing spending performance also raises concerns about holiday season sales. “The new data indicate that the holiday season was an OK one, but not great,” Hoffman and Faucher said.

The Commerce Department said that lower gasoline prices caused sales to sag, as motorists spent less to keep their vehicles running. Nonetheless, retail sales excluding gas and automobile sales still dipped 0.3%, a performance far different from the 0.5% increase predicted by economists. Some analysts believe that the poor performance in retail sales means consumers are saving the dollars they have to pour into the gas pump

While some analysts worry that the December sales numbers could compel economists to downgrade their growth predictions for the American economy this year, others say last month’s tepid spending is likely just a temporary holdup on route to greater expansion.

“This isn’t the start of a collapse in activity, as that doesn’t fit with the strength of employment growth and consumer confidence. Retail sales will strengthen again before too long,” Paul Diggle, an economist at Capital Economics in London, told Reuters.