Retail Sales Disappoint, Jobless Claims Rise: Is US Consumer Losing Steam?

U.S. retail sales edged higher in December, showing that consumers kept spending through the holiday season, but the increase wasn't as strong as economists had hoped. At the same time, an unexpected rise in weekly jobless claims hinted at a cooling labor market.

Retail and food services sales rose 0.4% last month, decelerating from upwardly revised 0.8% growth in November, according to advanced estimates from the U.S. Census Bureau released Thursday.

The outcome was slightly below the 0.6% increase economists expected, according to TradingEconomics estimates.

Compared to a year earlier, sales were up 3.9%, below November's 4.1% annual gain.

Excluding auto sales, retail sales were 0.4% higher on the month, accelerating from November’s 0.2% growth and matching expectations.

Some sectors thrive, others struggle

Consumer spending wasn't uniform across the board. Some sectors showed strength, while others weakened.

Miscellaneous store retailers marked a 4.3% monthly growth in sales, reversing the 3.9% drop witnessed in November.

Sporting goods, hobby, musical instrument and book stores also showed a notable 2.6% increase.

E-commerce witnessed a growth slowdown, with nonstore retailers ? such as Amazon.com Inc. (AMZN) ? seeing 0.2% growth, down from 1.8% in November.

Certain retailers struggled.

Building material, garden equipment and supplies dealers saw a 2% drop in December, with the sales decline worsening from November’s 0.8% dip.

Food services and drinking places also saw a contraction of 0.3% in monthly sales following a marginal 0.1% increase in November.

Excluding auto and gas sales, retail spending still rose 0.3%, showing an increase from November’s 0.2%.

Jobless claims rise

New unemployment claims climbed to 217,000 for the week ending Jan. 10, up from 203,000 the prior week, according to the U.S. Department of Labor. The increase was above economist expectations of 210,000.

Continuing claims fell to 1.859 million, down from the previous 1.87 million and below expectations of 1.867 million.

Although one week's data isn't enough to confirm a trend, a continued rise in jobless claims could indicate that hiring is slowing, potentially weighing on consumer spending in the months ahead.

Market Reactions

The U.S. dollar marginally rose, with the Invesco DB USD Index Bullish Fund ETF inching 0.2% higher, while Treasury yields ticked slightly lower, with the 10-year note falling 2 basis points to 4.66%.

Stock futures, on the other hand, were little moved. S&P 500 futures were up 0.1%, while Nasdaq 100 futures gained 0.4%.

The gains followed a strong session on Wednesday when the SPDR S&P 500 ETF Trust (SPY) jumped 1.8% after a softer-than-expected inflation report fueled speculation the Federal Reserve may cut interest rates sooner than previously expected.

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