Consumers were less inclined to open their wallets in the final month of the year, but the unexpected drop in retail sales was tempered by a decent upward revision to November’s numbers.
The U.S. Department of Commerce reported that advance retail sales, which are adjusted for seasonality, holiday and trading-day differences, fell 0.3% in December, versus the Bloomberg consensus of a 0.4% rise.
Ex-autos, sales dipped a disappointing 0.2%, and ex-autos and gasoline station sales, which gives us a look at so-called core sales, were down 0.3%.
Taking some of the sting out of the less-than-encouraging report, preliminary sales for November were revised upward by 0.5 percentage points to 1.8% and a more impressive 0.7 percentage points to 1.9% for sales ex-autos.
Core sales in November were up a very strong 1.0%, so the modest declines we experienced in December, when combined with the prior month, suggest the consumer continues to slowly re-engage amid a modestly improving economy.
It is difficult to ascertain why December sales fell, especially following some of the cautiously upbeat reports from retailers. Rock bottom prices offered just after Thanksgiving may have taken some sales away from December, while cold and unsettled weather near Christmas may have also pressured activity.
Unemployment is still high and job losses continue to mount, so there may have been a bit of caution vying with the Christmas cheer in the air last month.
Jobless claims up in week but trend still lower
Meanwhile, weekly initial jobless claims unexpectedly increased by 11,000 to 444,000, topping the Bloomberg forecast of 437,000. The 4-week moving average, however, remained in its steady downward trend, dropping 9,000 to 440,750, while continuing claims tumbled a steep 211,000 to 4.6 million.
Although weekly claims remain at a discouragingly-high level, the continued decline in the 4-week moving average has been encouraging and signals that the economy continues to slowly improve while layoffs ease.
Still, many companies continue to meet increased demand by utilizing current employees – witness sharp gains in productivity, which are normally seen in the early stages of an economic recovery.
We’ll need to see a noticeable strengthening in economic conditions before the unemployment rate embarks on a sustained decline. Unfortunately, the many headwinds still facing the economy suggest a more modest improvement in growth over the next couple of quarters, which could produce yet another jobless recovery.
For a synopsis of major issues impacting the economy here and abroad, please see Tomorrow’s Economy Today.