- The Washington Times - Wednesday, January 14, 2015

U.S. retail sales unexpectedly tumbled nearly 1 percent in December, the Commerce Department announced Wednesday, sending stock markets plummeting and leading some analysts to say it’s time to pump the brakes on talk of a strengthening U.S. economic recovery in 2015.

Setting aside the more volatile automotive, construction and restaurant sectors, retail activity fell a seasonally adjusted 0.4 percent for December, the biggest shopping month of the year, while previously announced figures for October and November were also revised lower.

The drop came despite plummeting gas prices, rising employment and increasingly confident talk from the Obama administration and private economists that the U.S. economy had finally put the 2008 Great Recession in the rear-view mirror and was poised for a sustained period of growth and wage gains.

After being down nearly 350 points at one point during the day, the Dow Jones index trimmed its losses but still suffered a significant drop. Traders said the retail numbers and a new World Bank forecast cutting global growth projections for the year depressed the market.

The Dow Jones industrial average lost 186 points, or 1.1 percent, to 17,427. The broader Standard & Poor’s 500 index fell 11 points, 0.6 percent, to 2,011. The Nasdaq composite fell 22 points, or 0.5 percent, to 4,639.

The latest retail numbers are especially worrisome because consumer spending accounts for about two-thirds of economic growth, and many expected the December numbers to be far more positive after a reported 0.6 percent gain the month before.

“Time to deflate some of the over-exuberance on the U.S. economy,” noted Sung Won Sohn, an economist with California State University’s School of Business and Economics, saying the fall in Web-based shopping was a particular disappointment.

“The lower price of gasoline and the brighter job picture [were] supposed to make the shoppers more willing to open their wallets. Unfortunately, they did not,” he said.

The retail numbers suggest that consumers remain cautious amid stubborn stagnation in wages, despite the U.S. economy’s recent surge. Average hourly pay fell in December, the Labor Department reported last week, and wage gains for all of 2014 barely matched in inflation, rising just 1.7 percent.

Big retailers such as Wal-Mart and Macy’s said that sales fell 0.9 percent in December, the biggest decline since 2011. Retail sales were up just 4 percent for the year, the weakest increase since 2009 and the end of the Great Recession.

Nine of the 13 categories tracked by the Commerce Department were down for December. Gas stations were particularly hard hit, as prices at the pump plummeted in recent months. But savings on fuel apparently did not spur U.S. consumers to spend the extra money elsewhere.

Economists will be watching closely to see how consumer anxiety affected GDP growth for the final quarter of the year, which many had been forecasting would rise above the 3 percent annual rate and set the stage for a strong 2015.

Some analysts said they thought the December numbers could still prove an aberration.

“It’s a weak number, but it follows some really strong ones and I don’t think it changes my general feeling on how the economy and consumers are doing,” Guy Berger, U.S. economist at Stamford, Connecticut-based RBS Securities Inc., told Bloomberg News. “Maybe the optimism a month ago got a little too heated.”

“This isn’t the start of a collapse in activity … as that doesn’t fit with the strength of employment growth and consumer confidence,”added Paul Diggle, an economist at Capital Economics, in a note to clients. “As such, retail sales will strengthen again before too long.”

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