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U.S. retail sales fell sharply in November; Philly Fed index disappoints

Published 12/15/2022, 08:33 AM
Updated 12/15/2022, 08:45 AM
© Reuters.

By Geoffrey Smith 

Investing.com -- U.S. retail sales posted their biggest decline in 11 months in November, in a sign that high prices, depleted savings and a weakening economic outlook have caught up with the American consumer.

Retail sales fell 0.6% from October, largely reversing a surprisingly strong 1.3% increase in October. The decline was much sharper than the 0.1% forecast ahead of time by economists. 

Sales declined in most categories, and were down by 0.2% even after adjusting for a sharper decline in activity at car dealerships and gas stations. Car dealerships, building materials stores and furniture stores all saw declines of around 2.5% from October, while sales of electrical appliances continued their decline with a 1.5% drop. 

By contrast, there were increases of less than 1% in food and beverage stores and at bars and restaurants.

At the same time, two closely-watched regional business surveys both pointed to weakness at the manufacturing sector, with both the Philadelphia Federal Reserve's manufacturing index and the New York Empire state manufacturing index coming out below forecasts.

Oren Klachkin, an analyst with Oxford Economics, argued that the figures were better than the headlines suggested, pointing to the much smaller decline in 'core' goods sales in the month. All the same, he warned, the likelihood is for further declines next year. 

"Consumers remain in a spending mood, but the tide will gradually shift over the coming months as income growth cools, lingering excess savings dry up, and negative wealth effects from lower stock and house prices come to bear," Klachkin wrote in a note to clients. 

The news was taken badly by U.S. financial markets: S&P 500 futures extended their declines in the overnight session to trade down 1.4% by 08:40 ET (13:40 GMT), while Nasdaq 100 futures were down 1.6% and Dow futures down 1.1%. 

The news comes only a day after the Federal Reserve indicated that it expects to keep raising interest rates through 2023, unconvinced that the slowdown seen so far will do enough, by itself, to bring inflation back down to its target level of 2%. One of the reasons for the Fed's reluctance to take its foot off the brakes was again in evidence on Thursday, as the week's jobless claims numbers - already at a historically low level - turned down again last week. 

Initial claims for jobless benefits fell to 211,000, the lowest in over two months, while continuing claims were effectively unchanged at 1.671 million.

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