Retail Sales Fall Sharply In December

Fourth-quarter GDP forecasts are being shaved after an unexpectedly weak verdict for December holiday sales. Retail sales fell 1.2 percent in December for the sharpest monthly decline of the expansion, since September 2009 and the last recession. The twist in the data is that vehicle sales, not really part of the holiday season, contributed strongly to December's results and excluding which sales fell 1.8 percent.

Aside from autos, the only other major component that was not in the minus column was building materials, up 0.3 percent for a group that is also not part of the holiday season. A major 3.9 percent drop for nonstore retailers headlines the details and points to a disappointing holiday for e-commerce. Sales at apparel stores fell 0.7 percent in December with department stores down 3.3 percent. Restaurant sales lost 0.7 percent for a second month in a row. Exaggerating December's downside was a 5.1 percent drop in gasoline sales that reflected price effects.

The year-on-year rate for total sales tells the story, falling nearly 2 percentage points to 2.3 percent for its lowest reading since late 2016. These results may reflect consumer edginess going into the government shutdown but they contrast very starkly with strength in the labor market. But the upshot is: confidence and consumer spending have moved to 2-year lows.