• WWD/ By Kathryn Hopkins

Retail Sales Unexpectedly Dropped Last Month

The Trump administration imposed additional tariffs on billions of dollars of consumer-facing goods, including apparel and footwear, in mid-September.

Is the strong consumer spending pattern the U.S. has enjoyed starting to crumble as the vital holiday season approaches? Retail sales unexpectedly dropped 0.3 percent in September — the same month that the Trump administration imposed additional tariffs on billions of dollars of consumer facing goods, including apparel and footwear. This was below analysts’ forecasts for a 0.3 percent rise and marked the first time in seven months that sales declined. A breakdown of the numbers from the Commerce

Department showed mixed fortunes in the apparel sector. Department store spending declined 1.6 percent, while sales at clothing stores and clothing accessories fared better, up 1.3 percent.

While economists pointed to the fact that some of the overall retail sales decline is due to falling gasoline prices, some still believe it could be an indication of an economy starting to run out of steam.

Michael Pearce, senior U.S. economist at Capital Economics, said: “The retail sales figures support our view that economic growth is slowing; we expect a further slowdown to 1 percent annualized in the fourth quarter.”

Nevertheless, the National Retail Federation is betting this year’s holiday shopping season will be better than last year. It is forecasting holiday sales to rise between 3.8 percent and 4.2 percent over 2018 to a total of between $727.9 billion and $730.7 billion in sales. This compares with $701.2 billion clocked in last year.

NRF chief economist Jack Kleinhenz thinks the pullback in September compared with August is possibly a reaction to increased fears over U.S.-China tensions and that consumer spending will get back on track for the holidays.

“While uncertainty around trade policy and other issues has dampened consumer sentiment recently, consumers still have a lot going for them as evidenced by longer-term trends and factors like the tight labor market. September is a tricky month to measure because of seasonal factors like the end of summer and back-to-school spending, and this year’s early Labor Day may have moved up some spending into the last days of August,” he said.

Moody’s vice president Mickey Chadha was also optimistic, stating that despite the decline from August, the year-over-year retail sales growth in September was a strong 4 percent.

“We continue to expect that increased consumer confidence, wage growth, low unemployment and the strong macroeconomic environment in the U.S. will result in 2019 retail sales growth of over 4 percent, led by e-commerce players like Amazon, off-price retailers like TJX and Ross, value and convenience-oriented retailers like Dollar General and Dollar Tree and discounters and warehouse clubs like Walmart and Target,” he added.

These forecasts may change if the Trump administration plows ahead with plans to implement additional 15 percent levies on all remaining Chinese imports.

On Friday, it was announced the U.S. has shelved additional tariffs for handbags due to come into force next week after it struck a partial trade deal with China, but for now the mid-December tariffs, which will impact apparel and footwear are still in play.


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