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Retail sales weaken but cap a record year

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POSTED January 12, 2012 7:35 p.m.


WASHINGTON (AP) — America's retailers enjoyed a record 2011 and their first $400 billion sales months ever. But the final month of the year was a dud.
Sales eked out a 0.1 percent increase in December, to a seasonally adjusted $400.6 billion.
It was the second straight month that sales topped $400 billion. Revised government data showed that sales in November also surpassed that level.
December's increase, though, was the weakest in seven months. Excluding volatile auto purchases, overall sales actually fell 0.2 percent. It was the first such drop since May 2010.
But analysts said they still expect consumers to help the economy strengthen further, especially because businesses have stepped up hiring. More jobs mean more people with money to spend.
"Although consumer spending is not particularly robust, households do continue to spend and provide moderate support for the overall economy," said Steven Wood, chief economist at Insight Economics.
For all of 2011, sales totaled a record $4.7 trillion. That was a gain of nearly 8 percent over 2010 — the largest percentage increase since 1999.
Steady sales gains have fueled a 20 percent surge from the low during the Great Recession. Monthly sales are even 6 percent above their pre-recession high. The figures confirm evidence that the economy was strengthening as 2011 ended.
Part of the reason for December's weak showing was lower gasoline prices. Those prices reduced sales at gasoline stations. Excluding gas stations, overall retail sales would have risen 0.3 percent in December.
Another factor was heavy discounting during the holiday shopping season. Many retailers said they had to offer cut prices in December to attract shoppers.
The sluggish retail-sales data followed a report this week that consumers raised their borrowing in November by the most in a decade. Many might have charged more spending to their credit cards because their pay has all but stagnated. The savings rate has also declined.
Continued job growth may be needed to sustain spending increases.
In the meantime, Thursday's news "reminds us that the economy is still struggling," said Michelle Meyer, an economist at Bank of America Merrill Lynch. "This is the recovery of fits and starts."
Separately, more people applied for unemployment benefits last week. Applications rose 24,000 to a seasonally adjusted 399,000. But the gain was due largely to companies shedding workers after the holiday season.
Economists downplayed the increase. It followed three months of declines that had reduced the number of unemployment applications to their lowest level in three years.
And businesses increased their stockpiles in November to meet rising consumer demand. That gain likely boosted economic growth in the final months of 2011. Companies are rebuilding stockpiles after cutting them last summer amid fears of another recession. It means many anticipate higher consumer spending.

 

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