Retail Sales Take an Unexpected Dip in November

Overall U.S. retail sales took a surprising tumble in November, the government said Wednesday, starting the key holiday sales season on a sour note as the highflying U.S. economy kept rapidly losing altitude.

The Commerce Department reported sales dropped 0.4% to a seasonally adjusted $271.7 billion last month after being flat in October. Wall Street analysts had expected a modest sales increase.

It was the first time since April, when sales declined 0.5%, that stores posted weaker monthly business, all the more striking because it came at the opening of the traditional Thanksgiving-to-Christmas sales season.

The weak number buttressed signs that George W. Bush--whose path to the White House was paved by a U.S. Supreme Court ruling late Tuesday--will take the helm of an economy that is losing vigor after years of blockbuster growth.

Some analysts said it was causing them to move forecasts ahead for a cut in interest rates to possibly as early as late January if a hoped-for soft landing of slower but sustained growth threatens to turn into a bumpy ride leading to recession after more than 9 1/2 years of unbroken expansion.

“The slowdown seems to be gathering force here and is becoming increasingly pervasive,” said Robert Dederick, economic advisor to Northern Trust Co. in Chicago, noting that surveys show consumer confidence is becoming less robust while the manufacturing sector has clearly lost strength.

The November drop in retail sales was concentrated in new-car sales, which tumbled 2.2% to $65.46 billion in November after a 1% drop in October. It was the steepest falloff in car dealers’ business since a 4.9% decrease in July 1998, when workers were striking at industry leader General Motors Corp.

Excluding autos, November sales were up a slim 0.2% after moving ahead 0.4% in October. Still, lackluster sales were not an encouraging sign for merchants, who do as much as half of their annual business in the weeks between Thanksgiving and Christmas.

Economist Joel Naroff of Naroff Economic Advisors Inc. in Holland, Pa., noted that some sales categories were relatively strong last month. Furniture sales were up 1.5% to $14.75 billion, restaurant sales climbed 0.2% to $25.81 billion and clothing store sales rose 0.8% to $12.21 billion.

“There are still the same tensions about the future direction of the consumer,” Naroff said, meaning it was unclear whether the spending slide would steepen or whether business would pick up as Christmas nears.

The U.S. economy receives two-thirds of its thrust from dollars spent by consumers.

Separately, the Labor Department reported Wednesday that U.S. import prices rose only moderately in November. Prices were up 0.2% after a 0.5% October drop, entirely because of rising oil costs. Stripping out the effect of petroleum, import prices actually fell 0.1% last month.

Sales at general merchandise stores, which include department stores, fell 0.2% to $34.42 billion in November after rising 0.5% in October.

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Retail Sales

In billions of dollars, seasonally adjusted:

November: $271.7

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Source: Commerce Department