U.S. retail sales fell 1.2% month-over-month in December, according to the latest figures from the Commerce Department. It was the largest decline in more than nine years and warned of a sharp drop in economic activity at the end of 2018.
“What I find particularly concerning was the pullback in discretionary areas such as food/drink services and sporting goods/hobby stores. E-commerce also took a dive,” said Jennifer Lee, director of economic research at BMO Capital Markets, in a note. “These are areas that consumers, if they are worried, will step back from first.”
Reuters said economists it surveyed had forecast a 0.2% increase in retail sales in December. Retail sales for November were revised down to show a 0.1% increase, instead of a 0.2% increase. Release of the December figures was delayed by the partial shutdown of the federal government.
The yield on the 10-year Treasury rate fell to 2.64% following the report. The two-year rate fell to 2.489%.
“The bottom line on this data release is that it is truly dreadful pretty much across the board,” Ward McCarthy, chief financial economist at Jefferies, said in a note.
“Taken literally, this data release would indicate that the consumer sector collapsed in December,” said McCarthy. “This release is such an outlier and so incongruous with the general trend in consumer spending, holiday consumer sales reports, and holiday seasons consumer credit data that it does raise suspicions of data reliability.”
“In the context of the government shutdown and delayed data collection, we still think that some suspicion is warranted,” McCarthy added.
Sales at non-store retailers, including e-commerce and mail-order sales, were down 3.9%, their biggest drop since 2008.
Consumer spending accounts for more than two-thirds of the U.S. economy.
The January sales report was scheduled for release Friday but has been delayed due to the federal government shutdown.