Fresh Growth Fears as US Retail Sales See Biggest Drop Since 2009
Yesterday was not great for the Fed as the latest US data added to fears of a growth slowdown. December Retail Sales fell 1.2% over the month, wildly below both the prior and expected 0.1% readings. Notably, the decline over December was the most significant drop in retail sales since September 2009. Furthermore, non-store retailers noted a 3.9% contraction in sales over the month, the biggest decline since November 2008.
While many might associate the decline to the government shutdown, it didn’t start until late December. Indeed, the data is consistent with the drop in consumer confidence ahead of the turn of the year as trade war concerns, and a sharp stock market rout both took their toll.
Core retail sales, excluding gasoline, automobiles and building materials, posted a 1.7% contraction over the month. This reflects the severity of the decline in consumer spending. The key now will be to see whether December’s data represents a one-off tumble in the indicator or a deepening downward trend.
The rally in the S&P off 2018 lows has now seen price completing a symmetry swing with the last bullish drive into highs previous year before the sell-off. The weekly close will be important to watch. Although this is slightly above the level, an end beneath 2732.19 could signal the start of a turn lower over coming weeks. If we stay above the level; however, the focus remains on a test of next resistance at the 2801.65 level.