What Do Weak Holiday Retail Sales Mean?

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The U.S. Commerce Department recently announced an unexpected 1% fall in December retail sales, despite the year’s busiest holiday shopping season. Retail activity plunged a seasonally adjusted 0.4% in December, excluding the more volatile construction, automotive and restaurant sectors. Not just that, the Department also announced lower revised numbers for October and November.

The heading numbers are also significant as it came amid rising consumer sentiment, improving jobs data and declining gas prices, all along the much talked period of sustained growth and wage gains. Analysts pointed that saving at fuel stations isn’t really converting into increased spending, and consumers are exercising cautious buying behavior or focusing on reducing high debt levels with extra savings.

Consumer spending in the U.S. accounts for almost two-thirds of economic growth and hence the latest retail numbers are viewed with caution. The lower numbers also cut analysts’ expectation of far more positive numbers in December, supported by 0.6% gain reported for November. Retails sales increase of 4% through the year also suggests the weakest increase since 2009.

Among the retailers which faced the heat include retail giants like Wal-Mart Stores, Inc. (NYSE:WMT) and Macy’s, Inc. (NYSE:M) as both of them reported 0.9% sales decline in December, the biggest decline since 2011. The stocks of Wal-Mart and Macy’s fell nearly 3% and 1.75%, respectively, during Wednesday’s session.

The Commerce Department’s announcement made the broader indices tumbled along with losses reported in many of the heavy-weight retail stocks. Dow Jones Industrial Average (INDEXDJX:.DJI), which closed 186 points or 1.06% down, was 350 points down at one point during the session. Alongside the U.S. retail numbers, World Bank’s forecast of lower growth projections also hampered the traders’ sentiment.

NASDAQ Composite (INDEXNASDAQ:.IXIC) fell 22 points or 0.5% and S&P 500 (INDEXSP:.INX) fell 11.76 points or 0.6% on Wednesday.

Lisa Ray

Lisa Ray primarily covers Retail and Healthcare. Lisa Ray has completed her MBA (Finance) and an avid market tracker. She is a stock market analyst who closely tracks US markets along with other global markets like India. She has been expressing her views for years about markets and also advises various clients.
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