WASHINGTON: Americans' retail spending unexpectedly took its biggest tumble in nearly a decade during the key holiday shopping period, government data showed Thursday (Feb 14).
While 2018 overall was a strong year and much of the decline was due to falling gasoline prices, the sudden frugality of the US consumer was a jolting reminder that cracks could be beginning to show in the world's largest economy.
The news sent Wall Street into the red, with stocks closing the day mostly lower, and it could weigh on estimates of GDP growth in the year's final quarter. The auto sector was a bright spot, however.
For the month, retail spending tallied at US$505.8 billion, seasonally-adjusted, a 1.2 per cent dip from the previous month, marking the largest month-to-month decrease since September 2009.
Economists had instead been expecting a token increase of 0.1 per cent.
The surprise retail weakness sent Wall Street into the red, with the Dow Jones tumbling at the open and down 0.5 per cent shortly before 1600 GMT.
The Commerce Department data, which had been delayed by the record five-week government shutdown, was held down by nose-diving sales at gasoline stations, where fuel prices have fallen sharply in recent months.
But consumers also held off spending at online retailers, bars and restaurants and department stores as well as at furniture and clothing outlets.
The level followed a downward revision for November but still put still sales up 2.3 per cent above December 2017.
December also had a Wall Street rout and economists say tumbling stock prices can make consumers wary of spending freely.
The National Retail Federation said Thursday that holiday shopping, which strips out auto and fuel sales, was up 2.9 per cent over 2017 - but this was still well below October forecasts for a 4.3-4.8 per cent rise in sales.
NRF President Matthew Shay said that "it appears that worries over the trade war and turmoil in the stock markets impacted consumer behavior more than we expected."
Federal Reserve Governor Lael Brainard said Thursday the retail numbers were a reminder that risks to US economic growth - which so far remains robust - were growing.
"It certainly adds to a story we want to take on board that there's downside risks at the same time we're seeing pretty good numbers," she told CNBC.
She noted slowing economic growth in China and Europe, tightening US financial conditions as well as Brexit negotiations - strongly suggesting the Fed will hold off raising rates for the near future.
But she cautioned against taking "too much signal" from a single month of retail data and said the US still had strong job creation.
With cheap fuel, auto sales were unscathed: sales at motor vehicle and parts dealers were up one per cent over November.
But excluding the volatile auto sector, sales were down an even weaker 1.4 per cent over November.
"These numbers are astonishing," Ian Shepherdson of Pantheon Macroeconomics said in a client note, adding that they did not match recent Redbook chain store survey results.
The "wild" numbers are likely to be revised upward and should not point to a new trend, he added.
"The consumer is no longer enjoying tax cuts or falling gas prices, but that's no reason to expect a rollover."