December Retail Sales Down Sharply, Q4 GDP Will be Very Weak

For the 6th month in a row, US consumers have cut back spending. The December consumer spending data tells us that retailers had a very tough time this holiday shopping season. Consumers reduced their spending by 2.7 percent but if you take out year end deals in the auto sector, retail sales actually fell 3.1 percent, the largest decline in at least 16 years. The Grinch really stole Christmas this year and no one is happy about it. Lower gasoline prices continued to drive down gas station receipts, but weaker spending was seen across the board. The worry now is that more retailers will be forced to file for bankrupcty protection and the latest consumer spending reinforces those fears. With more than 1 million Americans out of work in the last 2 months, concern about job security lead to more nimble shopping over the Christmas holidays.

Import prices dropped for the fifth month in a row, but by less than the market had expected.

Expect fourth quarter GDP to be very weak. Retail sales is one of the primary inputs to GDP and the sharp drop in consumer spending suggests that GDP could have fallen as much as 4 percent. The dollar should continue to weaken against the Japanese Yen but the Euro has its own host of problems. There are reports that Ireland may call in the IMF if the economy weakens. This is yet another reason why the ECB could cut interest rates on Thursday.

About Kathy Lien 235 Articles

Kathy Lien is an Internationally Published Author and Chief Strategist of, one of the world’s most popular online websites for currency research. Her trading books include the highly acclaimed, Day Trading the Currency Market: Technical and Fundamental Strategies to Profit form Market Swings (2005, Wiley); High Probability Trading Setups for the Currency Market E-Book (2006, Investopedia); and Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game (2007, Wiley). As Chief Currency Strategist at FXCM, Kathy is responsible for providing research and analysis for DailyFX, the research arm of FXCM. She also co-edits the BK Forex Advisor, an Premium Service with Boris Schlossberg – one of the few investment advisory letters focusing strictly on the 2 Trillion/day FX market.

Kathy is also one of the authors of Investopedia’s Forex Education section and has written for, the Asia Times Online, Stocks & Commodities Magazine, MarketWatch, ActiveTrader Magazine, Currency Trader, Futures Magazine and SFO. She is frequently quoted by Bloomberg, Reuters, the Wall street Journal, and the International Herald Tribune and has appeared on CNN, CNBC, CBS and Bloomberg Radio. She has also hosted trader chats on EliteTrader, eSignal and FXStreet, sharing her expertise in both technical and fundamental analysis.

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