WASHINGTON – A “staggering decline” in retail sales during December needs to “grab the attention” of policymakers according to one economist’s view. The data
show retail sales plunged 1.2% in December even though many economists had projected a 0.2%.
NAFCU’s chief economist, Curt Long, said the “delayed release of December retail sales showed a staggering decline in consumer spending during the heart of the holiday shopping season.”
“A drop in gas prices contributed, but losses were broad-based,” Long continued. “Nearly every sector declined during the month, including department stores (down 3.3%) and nonstore retailers, which includes online companies like Amazon (down 3.9%).
Long said he expects the report to grab the attention of policymakers, as the combined impact of tariffs, the government shutdown, and tighter monetary policy “appeared to take a toll.”
Still, Long added not too much should be made of one report even while noting “it is hard to shake the notion that the only thing keeping the economy afloat is the performance of the labor market.”
A Look at Consumer Prices
Separately, consumer prices saw no change in January as inflationary pressures continued to recede. Long said that a lack of price growth supports a pause in interest rate increases for the time being.
Data published by the Bureau of Labor Statistics shows the overall CPI decelerated to 1.5% over the 12-month period.
"Core price growth remains steady, but lower gas prices are dragging down headline inflation," Long said in a Macro Data Flash report. "The Fed has signaled that it will be patient with future rate hikes. The appearance of inflationary pressures would test that resolve, but so far there have been no indications that price growth will increase much beyond the Fed's 2% target.
"Following the most recent FOMC meeting, Chairman [Jerome] Powell stated that he would need to see evidence of firming inflation before considering another rate increase. If there is to be a rate hike in 2019, it will likely come in the second half of the year," Long added.
Core prices (excluding food and energy costs) increased 0.2% in January compared to the previous month. Year-over-year core CPI growth dipped slightly to 2.1%.
Energy prices declined 3.1% in January following a 2.6% decrease in December. From a year ago, energy prices were down 4.9%. Food prices rose 0.2% in January. On a year-over-year basis, food prices were up 1.6%.