Surprising Drop In US Retail Growth In December Weakens Growth Outlook

A United States government report on Thursday has shown a surprising drop in retail sales in the country for the month of December which cast shadows over the economic growth outlook for the country and which would probably induce the US Federal Reserve, which has already taken a cautious stance, to continue with it.

The report from the government about the retail sales had been delayed by four weeks because of the partial government shut down. It showed that the month on month drop in growth for retail sale in December was the most in the previous 9 years which delivers a potential red light because a major portion of the US economy is comprised of consumer spending. The numbers were well below all forecasts which resulted in a drop in stock indices and an increase in Treasuries. It also prompted analysts to bring down their forecasts for growth in the fourth-quarter of 2018 for the segment.

Even though retail sale figures are open to revision and even as the numbers were also questioned by some analysts because an upbeat holiday shopping season was indicated in other reports, the numbers clearly justify the stance that the Fed had taken in January to be more cautious in its approach to tweaking the interest rates after four rate hikes in 2018. And according to pricing in fed funds futures, it is expected by investors that the Fed would hold on its stance throughout 2019.

“It certainly caught my eye,” Fed Governor Lael Brainard said Thursday in a television interview in reference to the retail growth numbers. “It’s one month of data, so I don’t want to take too much signal from it,” she said. “It certainly adds to a story where we want to take on board that there are some downside risks.”

According to some analysts, the retail growth figures for December could also indicate concerns among consumers about the trade tensions with China, a prolonged government shutdown and a fall in the stock market which was the monthly highest in December since the 1930s. The December numbers are also in stark contrast to the growth reported in previous months and contradict other economic indicators such as growth rate of employment and wage which had indicated that consumers had better means for more spending.

“The numbers on their face are not good numbers and could fuel expectations that the economy is losing momentum,” said Michael Gapen, chief U.S. economist at Barclays. “But they stand in contrast to a lot of other indicators that show the economy is healthy — including the labor market, growth of employment. We expect things to rebound, but to a slower pace on average.”

The latest retail figures also indicate that there can be more than expected loss in momentum in retail sale in the first quarter as a slowdown because of the impact of wearing off of the Republican tax cuts was already being forecast by them.

(Adapted from


Categories: Economy & Finance, Geopolitics, Strategy, Sustainability, Uncategorized

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