The US Census Bureau has published monthly retail sales figures for December, reporting a 1.1 per cent month-on-month decline, down from US$685 billion ($992.6 billion) in November to US$677.1 billion ($981.2 billion).
The December result represented a sharper-than-expected dip, with the market forecasting a 0.9 per cent decline.
This followed a 1 per cent fall in the value of retail sales in November — recently revised from 0.6 per cent.
Notably, 11 of the 14 retail sales components recorded monthly falls, led by department stores (6.6 per cent), gasoline stations (4.6 per cent), and furniture retailers (2.5 per cent).
Stable or modest increases were recorded across the remaining components, with building materials recording the sharpest monthly rise (0.3 per cent).
Subdued retail sales figures have come off the back of a weaker-than-expected pipeline price index (PPI), which dropped 0.5 per cent — beyond market expectations of a 0.1 per cent fall.
According to James Knightley, chief international economist at ING Research, these indicators suggest inflationary pressures are “rapidly moderating”.
This, in turn, could signal a sooner-than-expected pause to the US Federal Reserve’s monetary policy tightening cycle, with interest rates “getting very close to the peak”.
“…We have further evidence of weaker activity and an increasingly benign inflation backdrop, which clearly suggests we are in the end game for Fed rate hikes,” he said.
The economist said he expects the Federal Reserve to action a 25 basis point hike in February, but added recent economic indicators and expectations of a looming recession “diminish the case for additional rate hikes”.
“With recessionary forces intensifying and inflation looking less and less threatening, the prospects for Fed rate cuts later in the year are growing,” Mr Knightley said.
Recession to “normalise” market
With recessionary conditions surfacing, markets are bracing for disruption.
However, according to ANZ Research, a recession would help recalibrate the economy, normalising supplier and demand dynamics.
“A mild fall in activity will bring some respite to consumers challenged by cost-of-living issues,” the research group noted in its latest Blue Lens report.
“It will normalise demand, giving businesses more space to secure supply and hold on to staff.
“It may also free up resources to address our most pressing structural challenges, including those around the natural environment.”
