Retail Sales fall after a strong November

Retail sales for December 2007 were down by 0.37% from November 2007 and up 4.24% from December 2006. Economists had expected retail sales to remain unchanged for the month of December.

There were downward revisions to October 2007 and November 2007 as well. October 2007 compared to September 2007 was revised from to a gain of 0.23% to a gain of 0.03%. November 2007 compared to October 2007 was revised from to a gain of 1.22% to a gain of 1.06%.

November 2007 Retail Sales numbers were very strong. It was one of the last indicators suggesting that we would not enter a recession. The market is reacting negatively to the December 2007 Retail Sales numbers. It isn’t necessarily because the numbers themselves are super weak, but more because the last hope for the economy, the U.S. consumer, seems to be faltering a bit.

Taking a look at the lagging components from December 2007 to November 2007 is also troublesome: Electronics and appliance stores, down 1.9%; Building material and garden equipment & supplies dealers, down 2.9%; Clothing, down 2.0%; Sporting goods, hobby, book and music stores, down 2.0%. Food & beverage stores were up 0.7%, and Food services & drinking places were up 0.2%. The items that were down were more discretionary in nature than the items that were strong. Also, these figures are not adjusted by inflation, so the rises in food prices may be also due to inflationary pressures.

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