The results were particularly disappointing because several other key economic indicators had suggested brighter prospects for the recovery: The monthly unemployment rate has been falling, consumer confidence has rebounded, and credit balances have spiked.
Thursday’s numbers, however, dampened some economists’ enthusiasm, prompting cuts to forecasts for gross domestic product and warnings of a slow start for 2012.
“There is no silver lining,” said Steve Blitz, chief economist for ITG Investment Research. “Today’s data should put to rest the notion of some super-strong fourth-quarter growth rate for the economy.”
The Commerce Department’s tally of December retail sales showed a meager 0.1 percent rise from the previous month, driven primarily by auto purchases. But excluding motor vehicles, sales dropped by 0.2 percent.
Several categories showed surprising weakness. Sales at electronics and appliance stores plunged 3.9 percent, while general merchandisers fell by 0.8 percent. Even online retailers, which have been a bright spot in the industry, saw sales decline by 0.4 percent.
Still, clothing stores enjoyed a 0.7 percent increase in sales, while building retailers ticked up 1.6 percent, perhaps driven by unseasonably warm weather in many parts of the country. Stuart Hoffman, chief economist for PNC Financial Services Group, noted that sales at gas stations dropped 1.6 percent as fuel prices eased — which could mean that consumers have more money jingling in their pockets for the future.
Hoffman said he believed that the economy would still grow at its fastest rate of the year during the fourth quarter. While December sales were weak, the Commerce Department also raised its analysis of November sales from a 0.2 rise to one of 0.4 percent.
“There’s no question it did trail off, but think about the past three months together,” he said.
The strong start and slower finish to the crucial holiday shopping season may also signal that the government’s data did not fully account for the retailers’ aggressive promotions on the day after Thanksgiving, which may have eaten into sales during the rest of the season.
“You’ve just got a subtle lack of activity,” said Steven Ricchiuto, chief economist for Mizuho Securities. “There were a lot of reports of buyers’ remorse after the Black Friday rush.”
Some economists said December’s slowdown was inevitable after several months of spending increases that exceeded the growth of incomes for Americans. The growth had been fueled by a decline in the personal savings rate to 3.5 percent and a sharp rise in credit card use. The Federal Reserve said Americans’ loan balances rose by nearly 10 percent in November to $2.5 trillion, the biggest increase in a decade.
While credit card spending might help boost the economy, a large debt load could also backfire if consumers cannot pay it off.
The real turning point for consumer spending — and the broader economy — will be employment. The number of people filing new jobless claims rose 6 percent last week, to 399,000. Although economists said the weekly claims number can be highly volatile, it served as a reminder of the fragility of the nation’s labor market. Ricchiuto said the increase may reflect companies shedding temporary workers. Still, analysts said the current quarter will almost certainly be less merry than the holidays.
“With spending having slowed towards the end of the year,” said Paul Dales, senior U.S. economist for Capital Economics, “the omens for 2012 are not great.”