Friday 15 December 2017

US retail sales fall back for second month in a row

Photo: Thinkstock
Photo: Thinkstock

Shobhana Chandra

US retail sales fell in May for the second month, prompting economists to cut forecasts for economic growth as limited job and income gains hold back consumers.

The 0.2pc decline matched April's drop, Commerce Department figures showed in Washington. Sales excluding car dealerships slumped by the most in two years.

The US economic recovery is being slowed by the lowest gains in wages in a year and unemployment exceeding 8pc.

Together, these are taking a toll on consumer spending that accounts for about 70pc of the economy, leaving it more vulnerable to shocks from the European crisis.

Federal Reserve policymakers will gather next week to decide whether further stimulus is needed to fuel the three-year-old expansion.

"The consumer is pulling back," said Michael Brown, an economist at Wells Fargo Securities LLC in Charlotte, North Carolina, who correctly forecast the drop in sales.

He added: "There isn't a lot of job creation. We will continue to see softer numbers."

The Standard & Poor's 500 Index of shares fell 0.3pc to 1,320.88 at 12.11 p.m. in New York. Treasuries advanced, sending the yield on the 10-year note down to 1.64pc, from 1.67pc late yesterday.

In the eurozone, industrial production decreased for a second month in April, led by a drop in Germany and adding to signs of a deepening economic slump.

Output in the 17-nation euro region declined 0.8pc from a month earlier, the EU's statistics office in Luxembourg said.

Japan's machinery orders increased more than forecast and South Korea's unemployment fell as Asian economies showed resilience in the face of Europe's debt crisis, other data showed.

Economists at Goldman Sachs Group Inc reduced their tracking estimate for US second-quarter gross domestic product following the retail sales report, to a 1.6pc gain from 1.8pc.

Morgan Stanley cut its projection 0.2 of a percentage point, to 1.8pc, while Credit Suisse marked down GDP for the period to 2.2pc from 2.5pc.

Another report yesterday showed that wholesale prices dropped in May by the most since July 2009 as energy and food costs decreased.

The US's Federal Open Market Committee, which sets the course of central bank policy, is due to begin a two-day meeting on June 19. The group may address slower job growth and the financial crisis in Europe.


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