- Gennadiy Goldberg, US Strategist at TD Securities
US retail sales unexpectedly fell in the busiest month of the year, as consumers pulled back on spending at retailers in December. According to the Commerce Department, sales at US retailers dropped 0.9%, the biggest decline since January, following a downwardly revised 0.4% growth in the preceding month and compared with economists' forecast for a 0.2% increase. Stripping out the volatile automobile sales component, sales fell 0.4% after climbing 0.1% in November. The figures suggest that sluggish wage growth is still weighing on many Americans. Average hourly pay fell in December, the government said last week, and climbed just 1.7% last year, slightly outperforming the 1.3% inflation rate. Retail sales data for October and December were revised downwards, which could impact US growth in the final three months of the year. Many economists had expected that robust consumer spending would lead growth in the fourth quarter to above a 3% annual rate. Moreover, the sudden and unexpectedly large deterioration in consumer demand may fuel speculation that the Fed may have to delay the timing of the onset of policy normalization for a few more months. For all 2014, retail sales rose just 4%, the weakest level since 2009 when the recession ended. The disappointing sales data come despite plummeting oil prices, with crude plunging 20% in December, which have freed up money for consumers to spend elsewhere.
© Dukascopy Bank SA