U.S. retail sales plunge points to wider world slump

Wed Jan 14, 2009 11:39pm GMT
 
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By Herbert Lash and Ruth Pitchford

NEW YORK/LONDON (Reuters) - U.S. consumers retrenched more than expected in December, data showed on Wednesday, while slumping industrial and economic output, along with new banking woes, signalled more pain in Europe.

Sales at U.S. retailers last month fell a sharp 2.7 percent from November as a deteriorating economy made consumers slash spending during the key holiday period. Compared with a year earlier, sales plunged a record 9.8 percent in December.

The data again suggested the year-long U.S. recession was deepening and could be the longest since 1981. New data also showed that the slowdown, far from running its full course, is spreading rapidly in Europe and elsewhere.

"The economy is staring at a very steep, downward trajectory," said Jim Demasi, a strategist at Stifel Nicolaus & Co in Baltimore. "This shows a very sharp falling in household wealth and job creation. This shows a shock in consumer confidence."

In another sign of the grim economic outlook, U.S. business inventories fell a slightly more-than-expected 0.7 percent in November, the biggest decline in seven years.

The German economy, meanwhile, contracted sharply in last year's final quarter and euro zone industrial output plunged in November, boosting expectations the European Central Bank will make a deep cut to interest rates on Thursday.

German gross domestic product slowed to 1.3 percent, its weakest growth since 2005, with flagging foreign trade making a negative contribution to growth for the first time since 2003.

Not all the economic data, which economists have said will still get worse before it gets better, was gloomy. A report from about the battered U.S. housing industry, which economists say will be key to recovery, offered some rays of hope.  Continued...

 
A pedestrian passes a Vodafone store on Oxford Street in central London, November 10, 2009. REUTERS/Kevin Coombs
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