December retail sales have unexpectedly crashed to a 9-year low with a 1.2% decline fueling concerns among market analysts and participants.

Key Takeaways

• The drop in retail sales is the worst since September 2009, mere weeks after the onset of the Great Recession.
• With early reports showing soft activity in retail, sales were expected to be flat or perhaps rising by as much as 0.2%. However, the 9-year low is unexpected and worrisome to onlookers.
• The decline is partially attributable to the partial government shutdown, the state of the stock market, and poor weather impacting December sales.

December retail sales data is exceptionally poor, with analysts speculating multiple causes including reduced sales activity as a result of diminished buying power created by stock market losses and unpaid federal government employees during the holiday season.

Profound weakness in Dec control retail sales (-1.7% m/m) should slash the contribution to real GDP from the personal consumption expenditures channel and result in far lower Q4'18 GDP tracking estimates, currently averaging ~2.5% q/q AR. Atlanta Fed updates GDPNow later today.

— Jeoff Hall (@JeoffHall) February 14, 2019

Sales Figures

The biggest drop in sales was seen at gas stations with a 5.1% decline which was not unexpected due to falling gasoline prices. Department stores reported a 3.3% decline in sales which was also somewhat expected due to the ever-increasing competition posed by the less overhead-intensive e-commerce competitors to brick-and-mortar stores.

However, even e-commerce took a major hit with internet sellers reporting a 3.9% decline in sales, the sharpest decline since November 2008 during the last recession.

Bars, grocers, home furnishers, pharmacies, restaurants, clothing stores, and hobby stores all saw reduced sales activity in December.

The figures are likely to impact Q4 GDP overall, with the cool-down to 2.7% growth now perhaps due to be even more pronounced than previously expected.

Expert Outlook

“These data are so wild that we have to expect hefty upward revisions, but if they stand, they are very unlikely to be representative of the trend over the next few months. The consumer is no longer enjoying tax cuts or falling gas prices, but that’s no reason to expect a rollover,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

Deutsche Bank rejected the notion that weather and the shutdown would still be impacting sales at this point, raising the question of whether there is a “crisis ahead” for the US economy.

Market Reaction

The USD has slipped lower following the news with strong corresponding activity seen in the price of spot gold which has ticked upward, as would be expected with so many reports all indicating a growth cool-down in the US economy.

Spot gold last traded at $1,311.30/oz, up 0.26% with a high of $1,312.37/oz and a low of $1,303.51/oz. After a solid run in the value of the USD, the recent reports have been enough to push gold back over the $1,310/oz mark which may prove to be the new line of support/resistance moving forward.