The Christmas season is usually one of the best times for retailers, but this year it looks to have been a catastrophe not seen since the 2008-2009 recession:
U.S. retail sales recorded their biggest drop in more than nine years in December as receipts fell across the board, suggesting a sharp slowdown in economic activity at the end of 2018.
The Commerce Department said on Thursday retail sales tumbled 1.2 percent, the largest decline since September 2009 when the economy was emerging from recession. Data for November was revised slightly down to show retail sales edging up 0.1 percent instead of gaining 0.2 percent as previously reported.
Economists polled by Reuters had forecast retail sales increasing 0.2 percent in December. Retail sales in December rose 2.3 percent from a year ago.
The December retail sales report was delayed by a 35-day partial shutdown of the federal government that ended on Jan. 25. No date has been set for the release of the January retail sales report, which was scheduled for publication on Friday.
Excluding automobiles, gasoline, building materials and food services, retail sales dropped 1.7 percent last month after a slightly upwardly revised 1.0 percent surge in November. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. They were previously reported to have jumped 0.9 percent in November.
In December, online and mail-order retail sales dropped 3.9 percent, the biggest drop since November 2008, after increasing 2.8 percent in November. Receipts at service stations dived 5.1 percent, the biggest fall since February 2016, reflecting cheaper gasoline prices.
The numbers are so awful, some analysts are saying they can’t be right:
The sudden and unexpected plunge in December’s retail sales data raised new concerns about a recession, but economists also say the biggest drop in nine years clashes with other data and may be suspect.
But nonetheless, Wall Street still took the data seriously and economists slashed fourth quarter GDP forecasts. JP Morgan cut its growth estimate to 2 percent from 2.6 percent.
“This literally came from out of left field… I thought January would have been bad,” said Chris Rupkey, chief financial economist at MUFG Union Bank. “All our reports earlier were that holiday sales were sparkling.”
“This is against the backdrop of the only data we had, which was the blockbuster employment numbers,” said Diane Swonk, chief economist at Grant Thornton. “If the world was that bad, that was the place we should have seen it and we didn’t. It leaves us all scratching our heads. It’s suspect, highly suspect.”