US consumers curbed their Christmas spending in December and more people filed claims for jobless benefits last week, casting fresh doubts on whether the economic recovery can last once government support fades.
The Commerce Department said today retail sales fell 0.3 per cent last month, the first decline in three months, as consumers spent less on vehicles and an array of other goods during the holiday shopping month.
Sales had increased 1.8 per cent in November. Analysts polled by Reuters had forecast retail sales gaining 0.5 per cent last month.
A separate report from the Labor Department showed initial claims for state unemployment benefits rose 11,000 to 444,000 last week, higher than the 437,000 claims that analysts surveyed by Reuters had forecast.
President Barack Obama faces pressure to find new ways to spur job creation and economic growth as government stimulus spending begins to taper off and the US Federal Reserve winds down its emergency lending and asset-buying programs.
"Will consumers be able to take over from the government and replace demand that has come so far from government spending? If the consumer is unable to do that, it's going to pose some significant risks to the global recovery story," said Boris Schlossberg, director of research at GFT Forex in New York.
S&P 500 stock index futures turned negative after unexpectedly weak jobless claims and retail sales data. The dollar pared gains against the yen. Prices of US government debt, seen as a safe haven in times of economic uncertainty, added to gains.
For the Fed, which has pledged to keep its benchmark interest rate near zero for an extended period, the figures suggested that both consumer demand and the job market were still under considerable pressure.
A separate report from the Labor Department showing import prices were unchanged in December pointed to tame inflation, providing even more incentive for the Fed to keep rates steady. The Fed holds its next policy-setting meeting in late January.
Compared to December 2008, sales rose 5.4 per cent but fell 6.2 per cent for the whole of 2009.
Motor vehicle purchases fell 0.8 per cent, while sales at electronics and appliance stores dropped 2.6 per cent.
The data, coming in the wake of a report last week showing a surprise drop in non-farm payrolls in December, could add to worries that the economic expansion that started in the third quarter of 2008 could falter once government stimulus ends.
Stubbornly high unemployment remains the weakest link in the recovery from the worst economic downturn since the 1930s. Job worries are expected to constrain consumer spending, which normally accounts for more than two-thirds of economic activity.
But the labour market is showing some signs of healing. The four-week moving average of claims, which smooths out weekly variations, dropped for a 19th straight week, declining 9,000 to 440,750, Labor Department data showed.
That was the lowest level for the four-week average of claims in nearly 18 months, since it was at 440,250 at the end of August 2008.
Excluding motor vehicles and parts, retail sales fell 0.2 per cent in December, the biggest decline since July, after rising 1.9 per cent the prior month. Economists had expected a 0.3 per cent increase.
Core retail sales, which excludes cars, petrol, and building materials, fell 0.3 per cent after rising 0.9 per cent in November.
The US housing market is still suffering from the downturn. The nation closed out 2009 with a record number of foreclosure actions and is poised to set a fresh record this year, real estate data company RealtyTrac said today.
It said 2.8 million properties with a mortgage received a foreclosure notice last year, up 21 per cent from 2008 and 120 per cent from 2007.
Separately, the Mortgage Bankers Association said a surge in demand for home refinancing loans helped push its weekly gauge of mortgage applications up by 14.3 per cent last week as interest rates edged down.
Reuters