US retail sales fell unexpectedly last month, capping the worst year on record, official data showed on Thursday in a disappointing report on a crucial driver of growth.
The Commerce Department said adjusted retail sales were US$353 billion, a decline of 0.3 percent from November instead of the consensus analyst forecast of a 0.5 percent increase.
“The consumer didn’t hit the stores nearly as much as thought this holiday season, and that’s another indication that the recovery is likely to be sluggish,” Joel Naroff of Naroff Economic Advisors said.
For all of last year, retail sales — a key indicator of consumer spending that drives two-thirds of the country’s economic activity — plunged 6.2 percent from a year ago as consumers snapped wallets shut in the face of high unemployment and economic turmoil.
It was the steepest annual plunge since the data series began in 1992. Sales had slipped a mere 0.5 percent in 2008, the first full year of the worst recession in decades.
“Although we may never see the same pre-crisis propensity of individuals to consume as increasing household saving was a byproduct of the downturn, today’s report was disappointing as it indicated that consumers remain hesitant amid the backdrop of high unemployment and substantially deteriorated net worth,” Charles Schwab & Co analysts said in a note to investors.
The surprise month-over-month decline last month followed a sharp half-point upward revision to November’s rise, to 1.8 percent. The department revised the October sales increase up a notch, to 1.2 percent.
Ian Shepherdson of High Frequency Economics said that November and last month’s data taken together “are not bad at all.”
“We need the January data for a final verdict on the holiday season ,but so far it looks better than the December headlines alone suggest,” he said.
Separately, weak unemployment data underlined the painful conditions in the labor market, where the unemployment rate held at 10 percent last month and employers cut 85,000 jobs.
The seasonally adjusted initial claims for unemployment insurance benefits in the week ending last Saturday stood at 444,000, an increase of 11,000 from the previous week’s revised figure
The economy has shed more than 7 million jobs since the economy officially entered recession in December 2007.
The retail sales report from last month offered signs of improvement that would be key to underpinning the fragile economic recovery.
On a 12-month basis, retail sales rose a hefty 5.4 percent from December 2008, near the height of the global financial crisis.
And fourth-quarter sales were up 1.7 percent from the prior quarter, suggesting a positive contribution by household spending to GDP, a broad measure of goods and services output.
The Commerce Department plans to release the initial estimate of fourth-quarter GDP on Jan. 29.
The world’s largest economy grew 2.8 percent in the third quarter after a year of contraction.
“Real consumer spending is still on track to expand by just under 2.0 percent in the fourth quarter of 2009, and real GDP is still on track to expand by close to 5.0 percent,” said Brian Bethune, chief US financial economist at IHS Global Insight.
Although the full-year decline marked the steepest falloff on record, the fourth-quarter data broadly trended upward, though auto and gasoline sales were flat.
“There is an unusual amount of noise in these monthly numbers related to recent sharp increases in gasoline prices, which tended to push up sales in the past two months, and major discounting by retailers, electronics suppliers and auto companies at the end of the year in order keep inventories lean,” Bethune said.
He said the volatility would probably become “even more apparent” in yesterday’s official data on last month’s consumer prices.
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