U.S. Retail Sales, Factory Output Data Lead to Lower Growth Expectations
The U.S. economy entered 2016 with little momentum from some of its key drivers, with consumers dialing back spending and factories weighed down by tepid global demand.
- (1888PressRelease) January 24, 2016 - Economists on Friday lowered their expectations for growth in the fourth quarter of 2015 and first quarter of this year amid a slew of disappointing U.S. economic data for December. Though weakness in the manufacturing sector has been evident for months, a slowdown in consumer momentum could raise doubts about the ability of households to buttress the U.S. economy from weakness in the rest of the world.
U.S. retail sales fell 0.1% in December, and were up just 2.1% in 2015, compared with a 3.9% annual gain the previous year, the Commerce Department said Friday. That was the weakest year for sales growth since the end of the recession in 2009.
The industrial sector also pulled back production for the third straight month in December, due in part to low oil prices and unusually warm weather pushing down output in mining and utilities, the Federal Reserve said Friday. A separate gauge of manufacturing in New York state, released Friday by the New York Fed, also plunged.
Separate data showed businesses also restocked their shelves at a slower pace last month, meaning companies placed fewer orders with manufacturers to replace those goods.
Taken together, the reports added to doubts about the economy's ability to regain traction in the new year. J.P. Morgan Chase dropped its projection for fourth-quarter economic output to an annualized 0.1%, from a previous estimate of 1%, and lowered its first-quarter forecast by a quarter of a percentage point to 2%.
Consumer spending is a key driver of the U.S. economy, representing more than two-thirds of economic output. Household consumption has helped the economy grow in recent quarters despite a stronger dollar and weak demand overseas, which have weighed on U.S. exporters.
Despite the lackluster end to 2015, many economists said they expect the strength of the domestic economy will continue to support growth this year, despite worries that a slowdown in China and a protracted slide in oil prices will become a bigger drag on U.S. output.
December wasn't all bad: Payrolls surged last month, as employers added 292,000 new jobs, and estimates for hiring in October and November were revised even higher, the Labor Department reported last week.
Wages also climbed 2.5% in December from a year earlier. A sustained pickup in wages, which many economists predict is around the corner, would also support stronger household spending this year.
One bright spot in Friday's lackluster data was the University of Michigan consumer sentiment index, which rose to 93.3 in January from 92.6 in December, a sign that consumers are taking the stock-market turbulence in stride.
Several economists suggested the retail sales report isn't a useful guide for consumer spending, since it doesn't measure spending on most services-including rent, health care and travel-which account for a growing share of outlays.
Slumping oil prices have also held down the sales figure over the past year, as consumers spent less at gas stations thanks to lower gasoline prices. Sales at gas stations fell 1.1% in December, and were down 19.4%.
Excluding gas stations, sales were still flat last month, as consumers also curtailed spending on general merchandise, clothing and accessories, groceries and electronics. Sales of motor vehicles and parts were flat from the previous month.
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