Consumers cut back on their spending in November, failing to keep up with even a low level of inflation for the month, the Commerce Department reported on December 15th.
The 0.6% monthly loss in retail sales was worse than the 0.3% reduction that the Dow Jones had expected would occur. The Labor Department's measure of inflation, the Consumer Price Index, increased by 0.1% in November, which fell short of expectations once more. Inflation correction is not applied to the data.
Measures that take into consideration both gasoline and car sales decreased by 0.2%.
Stocks fell after a morning wave of economic news that was mainly unfavourable. The Dow Jones Industrial Average lost over 500 points in early trading.
The drawdown had an impact in numerous categories. Furniture and home furnishings retailers reported a dip of 2.6%, motor vehicle and parts dealers had a fall of 2.3%, and building supply and garden centres saw a drop of 2.5%.
Even though petrol prices were dropping, service station sales only fell by 0.1%.
While sales in bars, restaurants, and other food and beverage establishments increased, online sales decreased by 0.9%.
While the CPI inflation rate was 7.1%, annual retail sales increased by 6.5%.
"We think this weakening is a portent of things to come with sluggish global growth and the strong dollar increasing the local drag from higher interest rates," says Andrew Hunter, senior U.S. economist at Capital Economics.
Weekly unemployment claims decreased to 211,000, according to the Labor Department, on December 15th, a decline of 20,000 from the previous period and substantially less than the Dow Jones prediction of 232,000. A week behind schedule claims have grown slightly to 1.671 million in number.
Furthermore, a lot of surveys conducted by regional Federal Reserve districts showed a fall in manufacturing activity in December.
The Empire State Manufacturing Survey used the New York region as a case study, recording a reading of -11.2 as opposed to the predicted -0.5.
That is the percentage difference between businesses reporting expansion versus decline. The overall business conditions index fell this month, which was mostly to blame for the report's dip of nearly 16 points into contraction territory. The region's stockpiles fell despite no change in price indexes.
Similar to the previous example, the Philadelphia Fed poll rose by 6 points but remained unfavourable at -13.8 in contrast to the -12 estimate. Sharply negative readings for new orders, unfilled orders, and delivery times all hurt the index. Prices for the area did, however, sharply decline, with drops in both prices paid and received metrics.
We anticipate continued manufacturing weakness, according to Hunter. "The strong dollar is now having a detrimental impact on exports, and a worldwide recession is on the horizon."
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