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US Retail Sales Two Month Decline Worst Since 2009

Posted by Joseph Trevisani on Feb 12, 2015 10:35:00 AM

Sales at U.S. retail stores dropped twice as much as expected in January, undermining the hope that an improving job market has given consumers the wherewithal to lead a strengthening economic recovery.

The 0.8 percent drop came after December's unrevised 0.9 percent decline, according to the Commerce Department in Washington D.C. today

Together the back to back 1.7 percent fall was the largest tumble since -1.7 percent in October 2009 (September -2.5 percent, October 0.8 percent) and -1.9 percent in March 2009 (February -0.3 percent, March -1.6 percent). Purchases declined in 6 of 13 categories. Economists in the Bloomberg survey had forecast a 0.4 percent.  

The widespread expectation that cheaper gasoline prices would translate into higher consumer spending and stronger economic growth has at the least been postponed.  

U.S. economic growth which is about 70 percent consumption fell  to 2.6 percent annually in fourth quarter from 5 percent in the third despite the best job creation in 17 years.

An average of 336,000 new positon were added to payrolls in November, December and January. Average hourly earnings jumped 0.5 percent in January, the biggest monthly increase since November 2008. 

For consumers perhaps one problem is that even with the good wage numbers from January the yearly increase was just  2.2 percent.

In all of 2014 wages rose just 2.0 percent, barely ahead of the 1.6 percent CPI gain. The core personal consumption expenditure price index which excludes food and energy costs and is the indicator preferred by the Federal Reserve rose 1.4 percent for the year.  

After more than six years of sub-par recovery where the U.S. economy has grown average of 2.4 percent annually since the end of the recession in June 2009, consumers may have earned their caution. 

Retail sales without automobiles sank 0.9 percent in January as in December and almost double the -0.5 percent estimate.  Sales excluding automobiles and gasoline rose 0.2 percent, half the prediction. December sales in the same category were revised to flat from -0.3 percent. 

Cheaper gasoline prices reduced receipts at filling stations and the overall sales figures as well, the Commerce Department figures are not corrected for price changes. Sales excluding gasoline were little changed. 

The retails sales figures that are incorporated into the gross domestic product calculation, the so-called 'control group' which eliminates food, automobiles, building material and gas station sales among others, rose 0.1 percent on a 0.4 percent forecast. The December result adjusted to -0.3 percent from -0.4 percent.  The 0.1 percent gain should have little effect on the first revision of the 2.6 percent annualized fourth quarter GDP due on February 27th.  

 

 Joseph Trevisani

Chief Market Strategist

WorldWideMarkets Online Trading

Charts: Bloomberg

retail feb 12

retail cg feb 12

 

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