What’s Behind The Drop In US Retail Sales?

Retail sales in the U.S. decreased 0.3 percent September 2019, the first such decline in seven months, according to figures released Wednesday (Oct. 16) by the U.S. Commerce Department. The news comes amid ongoing fears of a recession and worries about trade wars.

Automobile sales fell 0.9 percent, the sharpest decline in eight months, the Commerce Department said. Online retail suffered a 0.3 percent decline. Sales at furniture and home furnishing stores fell by 0.6 percent. Meanwhile, the retail sales for August were revised to a 0.6 percent gain from the previous 0.4 percent gain.

“While this is by no means conclusive evidence that the consumer is wavering (after all, the upward revisions reduce the impact of September’s declines), it nonetheless reinforces our ongoing concern that a spending retrenchment will ultimately trigger a more durable slowdown,” wrote Ian Lyngen, head of rates research at BMO Capital Markets, CNBC reported.

More Worries

The numbers come about a week after U.S. Federal Reserve officials expressed worry that slowing global growth, exacerbated by the U.S.-China trade war, could sap domestic hiring and economic activity, triggering a recession, the Financial Times reported.

Since the September Federal Reserve meeting, surveys and other economic data have hinted that weakness in manufacturing might be spreading into other parts of the U.S. economy, such as the services sector. Officials have not dispelled market expectations that interest rates could be cut again for the third time when they meet later this month.

Data points from the meeting minutes point to the likelihood of a recession in part due to the trade war and geopolitics. “Participants generally judged that downside risks to the outlook for economic activity had increased somewhat since their July meeting, particularly those stemming from trade policy uncertainty and conditions abroad,” the minutes said.

Gloomy Clouds

That’s not all.

Gloomy economic clouds keep gathering, and the latest example comes from Europe, as retailers and payment services providers shift more of their focus to the all-important holiday shopping season.

In case you haven’t read this already, the President of the European Central Bank (ECB) Mario Draghi last month “urged governments to take fiscal measures to supplement the central bank’s monetary stimulus and reinvigorate the eurozone economy,” according to CNBC.

The comments came after the ECB announced a stimulus package consisting of a lower main deposit rate and a new bond-buying program. ECB also relaunched its quantitative easing (QE) program and said it would begin buying 20 billion euros worth of assets monthly starting Nov. 1. The interest rate was slashed 10 points to negative 0.5 percent, a record low. The central bank could drop the rate even more, depending on inflation.

“In view of the weakening economic outlook and the continued prominence of downside risk, governments with fiscal space should act in an effective and timely manner,” Draghi said at a press conference on the stimulus package.

China Woes

Recent news also emerged that could paint a less than positive picture for China. Indeed, to bolster the country’s economy, the central bank said it was reducing the amount of cash that banks need to have as reserves for the third time in 2019, which released $126 billion — or 900 billion yuan.

The country’s second-quarter economic data showed 6.2 percent growth, but some believe the numbers are worse than what is being officially released, The Wall Street Journal reported. China’s reported data came in close to Beijing’s target, a figure that has been published quarterly for the past 4.5 years. But a multinational index of Chinese production indicates much smaller growth coupled with fewer workers returning to their jobs.

The retail storm clouds are gathering as merchants and consumers prepare for the upcoming holiday shopping season.