Thursday, January 14, 2010

US Economy Saw Biggest Drop In Retail Sales In History

There really is no way to sugar coat any of this. The economy was in shambles last year.
Retail sales fell in December as demand for autos, clothing and appliances all slipped, a disappointing finish to a year in which sales had the largest drop on record.

The weakness in consumer demand highlighted the formidable hurdles facing the economy as it struggles to recover from the deepest recession in seven decades.

The Commerce Department said Thursday that retail sales declined 0.3 percent in December compared with November, much weaker than the 0.5 percent rise that economists had been expecting. Excluding autos, sales dropped by 0.2 percent, also weaker than the 0.3 percent rise analyst had forecast.

For the year, sales fell 6.2 percent, the biggest decline on records that go back to 1992. The only other year that annual sales fell was in 2008, when they slipped by 0.5 percent.

The 0.3 percent decline in December was the first setback since September, when sales had fallen 2 percent. Sales posted strong gains of 1.2 percent in October and 1.8 percent in November, raising hopes that the consumer is starting to mount a comeback.
Sales gains in October and November were only month over month increases; the sales were sharply down versus a year ago. Also, seasonal sales come into play and retailers were pushing deep discounted sales well before the traditional Christmas sales that start after Thanksgiving. Alas, that did little to help retailers overall.

For all the talk about how this was an unexpected result, the economists (or the reports pushing that meme) must have had blinders on since sales had been goosed for the 3d quarter by cash for clunkers and sales dropped off once that program ended. Home sales continue lagging, and banks are finding that even if they wanted to lend to borrowers who had sufficient credit, there just aren't that make takes out there willing to increase their exposure. There's uncertainty in the air.

Unemployment rates rose to levels not seen in decades, and despite claims from the White House that millions of jobs were created or saved, businesses continued shutting their doors and people stopped spending because the government's policies created disincentives to spend and to not risk further exposure should plans for health care reform come to fruition.

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