US perilously close to new recession as retail sales figures stall
Published 15/09/2011 | 05:00
GROWTH in US retail sales stalled in August after a budgetary battle in Congress crushed consumer sentiment, leaving the economy perched close to recession.
The weak data put more pressure on the Federal Reserve to try to boost growth.
"The slowdown in the economy is real," said Steven Ricchiuto, chief economist at Mizuho Securities in New York. He added: "It's a broad-based slowdown and that's pivotal."
Retail sales were unchanged last month from July, the Commerce Department said yesterday. The government also lowered its previous estimates for growth in June and July.
The data was the latest hard evidence that the United States is flirting with recession. Other reports have shown that there was no employment growth in August, while claims for jobless benefits rose in early September.
Consumer confidence plunged last month after a battle over the federal deficit slammed stock prices and pushed the nation to the brink of default. The country's debt was then downgraded.
"The consumer reacted to the debt ceiling (argument), the downgrade and the equity market swoon by basically hunkering down and not spending," said Tom Porcelli, senior US economist at RBC Capital Markets in New York.
Citing the weak data, Nomura cut its forecast for third-quarter economic growth to 2.4pc from 2.6pc.
However, major US stock indices shook off the data and rose after the head of the European Commission said he would soon present options for the introduction of euro area bonds, which could help the region fight its debt crisis.
Consumer spending accounts for about two-thirds of US economic activity and the retail sales figures showed that spending in the first two months of the third quarter was weaker than many forecasters had expected.
An increase in sales of electronics, gasoline and food was balanced with drops in purchases of cars, furniture and clothes.
Spending at restaurants and bars also dipped.