Sales at US retailers declined last month by the most since June 2012 amid bad weather and uneven progress in the labor market, signaling the economy was off to a slow start this year.
The 0.4 percent decrease followed a revised 0.1 percent drop in December last year that was previously reported as an increase, according to US Department of Commerce figures released on Thursday in Washington. The median forecast in a Bloomberg survey of economists called for no change. Jobless claims unexpectedly climbed last week, other data showed.
Slower employment and wage growth the past two months, along with colder-than-normal temperatures, caused US shoppers to pull back after the strongest consumer spending pace in three years in the final quarter of last year. Economists at Goldman Sachs Group Inc, Credit Suisse and Morgan Stanley were among those reducing tracking estimates for first-quarter growth.
“It’s not looking good for consumer spending,” said Guy Berger, a US economist at RBS Securities Inc in Stamford, Connecticut, and the top sales forecaster over the last two years, according to data compiled by Bloomberg.
“Even if you have some modest improvement in the pace of employment growth, that’s not enough to generate a huge improvement in income,” he said.
More Americans than forecast filed applications for unemployment benefits last week, Labor Department figures showed on Thursday. Jobless claims increased by 8,000 to 339,000 in the week that ended on Saturday last week.
The median projection in a Bloomberg survey of economists called for 330,000 claims.
The expiration of emergency jobless benefits probably also played a role in holding back sales. Federal benefits for the long-term unemployed expired on Dec. 28 last year, shutting off aid to more than a million people. Legislation to extend the program for three months, at a cost of US$6.4 billion, is stalled in the Senate.
More than 3.6 million people have been without work for 27 weeks or longer, according to the US Department of Labor.
After the drop in retail sales, Goldman Sachs cut its tracking estimate for first-quarter growth to 1.9 percent from 2.3 percent, Credit Suisse lowered to 1.6 percent from 2.6 percent and Morgan Stanley reduced its projection to 0.9 percent from 1.9 percent.
Last month was the coldest in three years, with snowfall almost four times above normal, according to weather-data provider Planalytics Inc. That followed the coldest December since 2009 with snowfall 21 percent above normal.
The drop in sales was broad-based, with nine of 13 major categories showing declines last month, led by auto dealers, sporting goods stores and apparel outlets, Thursday’s retail report showed.
“We’re off to a disappointing start to the year,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, who projected a 0.3 percent decline in sales. “The weather clearly had some impact.”
At the same time, “purchasing power is constrained. Consumers really aren’t borrowing, and wage growth is sluggish,” he said.
Sales slumped 2.1 percent at automobile dealers, the most since October 2012, after a 1.8 percent decrease the prior month.
Automakers said adverse weather depressed vehicle deliveries, which have been a bright spot for consumer spending in this expansion. Cars and light trucks sold at a 15.2 million annualized pace last month, slowing from a 15.3 million rate in December last year that had helped cap the best year for the industry since 2007, according to Ward’s Automotive Group.