Share
January 14, 2015 8:35 AM, EST

Retail Sales Slump in Broad-Based December Retreat

Daniel Acker/Bloomberg News

Retail sales in the United States slumped in December by the most in almost a year, reflecting a broad-based retreat that probably will prompt economists to cut growth forecasts.

The 0.9% drop, the biggest since January 2014, followed a 0.4% gain in November that was smaller than previously estimated, Commerce Department figures showed Jan. 14. Last month’s decrease was almost twice as large as the most pessimistic estimate of 87 economists surveyed by Bloomberg.

Electronics and clothing stores were among the nine of 13 major categories that showed a drop in receipts last month as American consumers decided to save instead of spend the windfall from lower gasoline prices. Continued improvement in the labor market and a pick-up in wage growth will be needed to support demand at retailers such as Family Dollar Stores Inc.

“Weakness in core retail spending is at risk of confirming the wage deterioration is more severe than perhaps thought,” Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. at New York, said before the report. “We had very strong job growth last year, but wage growth left something to be desired.”

The median forecast of economists surveyed by Bloomberg called for a 0.1% decline. Estimates ranged from a 0.5% drop to a 0.7% increase.

November retail sales previously were reported as a gain of 0.7%. October data also were revised down to show a 0.3% increase from a previously reported 0.5% gain.

Purchases increased 4% in 2014 after a 4.1% gain the previous year.

In addition to electronics and clothing, sales also fell at auto dealers, building material merchants, sporting goods and general merchandise stores.

The figures used to calculate gross domestic product, which exclude categories such as food services, auto dealers, home-improvement stores and service stations, decreased 0.4%, the worst performance since snow covered much of the country in January 2014, after rising 0.6% in November.

Falling gas prices have hurt receipts at filling stations, as the Commerce Department’s retail sales data aren’t adjusted for prices. Purchases there plunged 6.5%, the most in six years, the report showed. Gas station receipts accounted for about 10% of total retail sales last year.

The price of a gallon of regular gasoline fell to $2.10 on Jan. 12, the cheapest since May 2009, according to U.S. motoring group AAA. In December, it fell 19 %.

The biggest drop in fuel costs in six years pushed prices of imported goods down 2.5% in December, a report from the Labor Department showed. The cost of nonfuel goods bought overseas declined 0.1% last month.

Lower fuel prices have emboldened consumers to purchase new vehicles, to the benefit of automakers such as Ford Motor Co. and General Motors Co. Light vehicles sold at a 16.7 million annualized pace a month on average last quarter, capping the industries best year since 2006, according to Ward’s Automotive Group.

The Jan. 14 report showed auto dealers’ sales declined 0.7% in December after rising 1.6% the prior month.

Continued job growth and higher paychecks will be needed for households to ramp up spending in a way that would sustain recent economic momentum.

Labor Department data last week showed payrolls climbed by 252,000 in December after a 353,000 gain the prior month that was higher than previously reported. The unemployment rate fell to 0.2 percentage point to 5.6%, the lowest level since June 2008.

Wages have been slow to strengthen, with average hourly earnings falling 0.2% in December from the month before in the first drop since late 2012. That limits the amount of spending consumers can undertake without dipping into savings or racking up debt.

“Macrochallenges including lack of wage growth, persistent low labor force participation and rising housing and health insurance costs may continue to adversely impact low- and middle-income customers,” Family Dollar Stores CEO Howard Levine said in a Jan. 8 earnings call. “When we look at the Family Dollar shopper, it is clear that she has continued to face economic headwinds even as the broader market has experienced a recovery.”