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Core Retail Sales In US Down By 1.7% In Dec 2018

American shoppers which are the main economy drivers are now showing signs of fatigue and it is not due to recession as there is no dearth of jobs or funds but even the core retail sales of the nation fell by 1.7% during December which is a first in past two decades. While some blame it on the stock market crisis during holiday season of December others attribute it to the government shutdown that left several people without salaries for nearly two months. Whatever may be the cause the sudden shift in expenditure by Americans has sent economists back to their calculators to redo their growth forecast numbers.

While Goldman Sachs reduced its fourth quarter estimate of GDP to 1.9%, the Bank of American has slashed it to 1.5%. Federal Reserve’s estimate for growth during first quarter has been brought down by half to 1.1% which is an uncomfortable reminder that it is not just the big retailers that depend on shoppers to stay afloat. As Peter Boockvar of Bleakley Advisory Group says, “US consumers are holding global economy on their shoulders” in his report last week.

Two thirds of the US economy which is the largest in the world depends on consumer spending. The second largest economy China is also witnessing a sharp decline while Germany’s annual growth rate is facing its lowest point in five years. Other economies in Europe are also going through a tough phase as Brexit is weighing down on UK’s businesses while recession has already set in Italy. The glut in share market led to fears of economic slowdown which could have been the trigger for slowdown in consumer spending. But the situation has improved now with the end of government shutdown which has led to growth in stock market activity helping the Nasdaqurge by 12% in 2019.