US Retail Sales Collapse: Recession Is Coming
NEW YORK – February 19, 2019
Statistics on retail sales in the US in December shocked analysts - instead of the expected growth of 0.2%, there was a fall of 1.2% (the worst figure in 9 years). Some experts said that this figure is wrong, and some that it’s a sign of a quick recession:
Data from the US Department of Commerce came out with a delay due to the government's shutdown and did not coincide with some other indicators. Data for January is also delayed.
However, Wall Street economists were forced to take into account December statistics. Estimates of US GDP growth for the fourth quarter were lowered (JP Morgan cut the figure from 2.6% to 2%).
A more serious decline in consumer activity was observed only 9 years ago - in September 2009, when the US economy was just starting to emerge from the recession caused by the 2008 financial crisis.
Online sales fell by 3.9%, which was the worst fall in 10 years since November 2008.
Diane Swonk, a senior economist at the Grant Thornton group of companies, pointed out that the fall in retail sales contradicts employment growth data and therefore looks suspicious. Perhaps this statistic will be revised.
There are, however, obvious factors explaining the rare and unpleasant decline in sales during the Christmas period.
In the first half of December, the stock market fell significantly, which is extremely unusual for this month.
On December 25, a shutdown began and lasted a record 35 days.
These events had an extremely negative impact on the news background and could discourage American citizens from shopping, forcing them to think about saving for a rainy day.
Because of the shutdown, the Fed’s plans to continuing to raise key rates, which they talked a lot about in the fall, receded into the background. On December 19, Fed Chairman Jerome Powell announced another rate hike and a continuation of the policy on reducing the balance of Bank of America. However, the Fed leadership, concerned about the negative reaction of the market, soon hinted that it might temporarily stop raising rates.
As a result, at the end of December and in January, news from the Fed managed to lift the market. Last week, however, after news of a fall in sales and lower GDP estimates in the fourth quarter, stock quotes have again gone into the red.
The consumer confidence index fell both in December and in January. This may indicate that January sales statistics will also be negative.
If in the coming months the data will be as bad, then a recession is guaranteed. But even if the statistics improve, there will not be much optimism. This will show that American consumers are massively curtailing purchases when the stock market falls, and this means that in the event of a serious correction in the market, consumer panic will simply strangle the economy.
It is time for the media to understand that provoking mass hysteria and fears among consumers has quite tangible economic consequences.