US Retail Sales Record Biggest Decline Since 2009

US Retail Sales Record Biggest Decline Since 2009
February 15, 2019

 

The US dollar declined against a currency basket on Thursday as the latest data signals tough times ahead. Retail, inflation, and even jobs impacted the greenback towards the end of the trading week, leaving investors concerned that a contraction is on the horizon.  The USD/JPY pair fell from a high of 111.109 to a low of 110.405 in the past 24 hours and is trading at 110.32 at the time of writing this article.

 

Worst retail sales decline in nine years raises recession fears in the US

The latest economic data published by the US Census Bureau shows that the retail sales fell sharply by 1.2% m-o-m in December, missing the 0.2% gain anticipated by economists. It is the most significant decline since 2009. November’s figures were downwardly revised to show a 0.1% increase in retail sales instead of the 0.2% growth reported earlier. The partial shutdown of the US government has resulted in a 35-day delay in publishing the report. Almost all the sectors posted a decline. While gas stations posted a 5.1% drop in sales, e-commerce sales declined 3.9%. Likewise, department stores sales fell by 3.3%, while restaurants sales decreased by 0.67%.

Considering the slowdown in consumer spending, the Federal Reserve Bank of Atlanta slashed its fourth-quarter growth estimate to just 1.5%, from the prior projection of 2.7%. If that turns out to be a reality, then economic growth for 2018 would significantly miss 3% target of Trump’s administration.

Commenting on the plunge in retail sales, National Retail Federation President Matthew Shay said: “It appears that worries over the trade war and turmoil in the stock markets impacted consumer behavior more than we expected. It’s very disappointing that clearly avoidable actions by the government influenced consumer confidence and unnecessarily depressed December retail sales.”

The Bureau of Economic Analysis (BEA) announced that the producer price index (PP) fell 0.1% in January, mainly due to a drop in energy prices. The market had anticipated an increase of 0.1%. Notably, the PPI dropped 0.1% in December as well. Gas prices slipped 7.1%, wholefood costs fell 1.7%, but wholesale prices gained 0.1%. The annual inflation rate dropped to 2%, down from 2.5%. Similarly, the yearly rate of increase in core prices declined to 2.5%, from 2.8%.

The Labor Department reported a considerable increase in jobless claims in February as monthly averages hit a yearly high. The monthly average of jobless claims rose 6,750 last week to 231,750, the highest level since January 2018.

The report also indicated that weekly jobless claims in the week ending February 9th increased by 4,000 to a seasonally-adjusted 239,000. The market had anticipated new claims to decline to 225,000.

The historical price chart indicates that the USD/JPY has broken the support level of 110.47. Additionally, the RSI indicator’s reading has fallen below 50. Furthermore, the currency pair is also trading below its 50-day moving average. The next major support is expected only at 109.60. As a result, we are expecting the decline to continue in the near-term.

USD - technical analysis - 15th February 2019

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.

Ian Maguire

Ian Maguire

Ian is our resident contributor to the latest going ons in the cryptomarket, keeping up to date with the latest icos and coins


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