Greatest Decline in US Retail Sales Since September

For the first time in seven months, US retail sales declined. This worries economists because there is a fear that the deceleration of the American manufacturing sector is trickling into the consumer aspect of the economy.

Ian Lyngen, a researcher at BMO Capital Markets, revealed there is no tangible evidence that consumerism is fluctuating. But this drop strengthens the ongoing apprehension that spending cutbacks from consumers will eventually prompt a more enduring decline.

On Wednesday, the Commerce Department announced that retail sales fell 0.3% last month. Households slowed down on online purchases, building materials, and automobiles. This has been the first slowdown since February. This has led to a push for more cuts in interest rates by the Federal Reserve Bank.

Is the Consumer Economy Cracking?

Chief economist Kleinhenz, at the National Retail Federation, disclosed that the drop in sales could have been a response to increasing angst over US-China tensions. The world’s two biggest economies disputing over trade deals could be affecting US consumers.
Although Kleinhenz mentions that, US consumers still have a lot going. However, he did add that retail spending in September was difficult to measure because of seasonal elements including back to school shopping. An earlier Labour Day in 2019 carried some of the expenditure into August.

Financial markets took a hit in its pace after the provocation of stocks by unrestricted consumer spending reasonably greater in the New York morning trade. The S&P 500 buyer discretionary sector rose 0.4 percent.

The market data aimed at August amended to display retail sales rising 0.6% rather than 0.4%, as previously stated. Reuter’s economists predicted that retail sales would rise 0.3% for September. However, in comparison to September 2018, there is a 4.1% climb in retail sales. Looking into other sectors, auto sells dropped 0.9% in September- the highest drop in eight months.

Meanwhile, receipts at service stations declined 0.7%, which may demonstrate more affordable gasoline. After rising 0.3% in August, gasoline, automobiles, retail sales and building materials were different in September. The ‘core figure’ correlates better to the consumer spending element of the economic activity of the US.

What Do Experts Think?

Capital Economist analysts commented that expenditure climbed 2.5 percent in the third quarter. These results are 4.2 percent lower than in the second quarter resulting in a slump in the overall economic growth by just 1.5 percent.

However, last month’s drop alluded to the decline in consumer spending in the third quarter. Economists have been anticipating a slowdown after there was growth in the previous quarter. Michael Pearce from Capital Economics stated that the September retail sales decline was partially influenced by fallbacks on gasoline expenses. However, since core control group retail sales stayed unaltered, the indication shows consumption growth is slumping.

Up until now, the durability of the US consumer has acted as an advantage for President Trump since he has been praising the well-being of the US economy during the trade war. Although news sources have revealed that Trump has declared a temporary agreement, economists are wary for the future of the US economy. Where will this trade war take us? And how far is Trump willing to go?