The crowd was expecting a slight gain but instead found itself on the receiving end of a sharp tumble.
The consensus forecast called for a 0.1% rise in retail sales for December, according to TheStreet.com. The actual number was nowhere near that relatively sunny prediction. Retail sales crumbled by 0.4% last month, the Census Bureau reported this morning–the steepest decline since June.
The monthly change in retail sales is a volatile beast, of course, and so any one report doesn’t tell you much. Indeed, November enjoyed a 1% surge, only to watch it crash and burn in December.
But there’s more insight embedded in the rolling 12-month trend, and by that measure there’s reason to worry. As our chart below shows, the trend is definitely not your friend of late. The strong growth that defined the 12-month change in retail sales in 2003-2006 has now been downsized to something less. Yes, there was a burst of buying last year, which gave hope to the idea that the downshift of 2006 was only temporary. But the downside momentum appears to be building.
The economic context suggests that the latest drop reflects a weary consumer. Fears that consumer spending would slow or even decline have been around for years but Joe Sixpack always managed to keep the ball rolling. Is this time different? Yes, it may be. Years of piling up debt may finally be coming back to haunt Joe. The fallout from the housing correction is one reason. Without the constant drumbeat of rising home equity to inspire consumer purchases, the prospect of buy now and pay later may have lost some of its luster.