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News > Economy
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U.S. retail sales stabilize
graphic January 15, 2002: 10:13 a.m. ET

Sales drop only 0.1% in December, much less than expected.
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  • Greenspan: economy still at risk - Jan. 11, 2002
  • Fed officials cautious - Jan. 8, 2002
  • Unemployment rises - Jan. 4, 2002
  • What will the Fed do for an encore? - Jan. 3, 2002
  • Fed makes 11th cut of 2001 - Dec. 11, 2001
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  • Retail sales report
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    NEW YORK (CNN/Money) - U.S. retail sales posted a tiny decline in December, the government said Tuesday, and though the drop was much smaller than expected many economists wondered if consumer spending could hold up in 2002 under the weight of mounting job cuts.

    Sales fell 0.1 percent to a seasonally adjusted $295.1 billion, the Commerce Department said, after falling a revised 3.0 percent in November. Economists surveyed by Briefing.com expected sales to drop 1.2 percent.

    Excluding volatile sales of automobiles and car parts, sales fell 0.1 percent, a little worse than economists surveyed by Briefing.com expected; they thought sales would not change.

    For all of 2001, retail sales rose by 3.4 percent, according to the Commerce Department, compared with a 7.6 percent gain in 2000. It was the weakest year for sales since the department began keeping track of them under the current system in 1993.

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    "On a year-on-year basis, the trend is one of weakness," Dresdner Kleinwort Wasserstein economist Elisabeth Stoegmueller told Reuters. "We had a strong October, a strong rebound after the September attacks. We ended the fourth quarter on a strong footing and fell off from there. The momentum is going downward going into 2002."

    U.S. stock prices rose in early trading, while Treasury bond prices were mostly lower.

    Retail sales are watched closely because consumer spending fuels two-thirds of the U.S. economy, which has been in a recession since last March, according to the National Bureau of Economic Research.

    In order to keep consumers spending despite the recession and the highest unemployment rate in six years, the Federal Reserve cut its target for short-term interest rates 11 times in 2001 to the lowest level in 40 years.

    Most economists are confident of a recovery some time in 2002. Recent signs of stabilization in retail sales, consumer confidence and the beleaguered manufacturing sector have led some to think that recovery will come sooner rather than later, possibly even forcing the Fed to raise rates again this year.

    Fed Chairman Alan Greenspan and other Fed officials, on the other hand, recently have expressed caution about the economy, saying they will need to see more proof of its recovery. Certainly some of the data they will take into account are retail sales.

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    "Greenspan's comments ... [seemed] to suggest that the risks are weighted toward continued weakness in the economy, but these numbers raise questions about that conclusion," Northern Trust Co. economist Asha Bangalore told Reuters. "Still, I'm not certain the Fed governors would be willing to disagree with their boss."

    Some economists are worried that consumer spending can't possibly hold up under the weight of mounting job cuts and that the fourth quarter's strength -- which may even have helped fourth-quarter gross domestic product (GDP), the broadest measure of the economy, stay in positive territory -- "stole" strength from future quarters.

    The most obvious example is auto sales, which jumped 24.2 percent in October, boosted by zero-percent financing and other incentives in the fall. Auto sales fell back to earth in November, but economists think they've got a lot further to go.

    "What they [Fed officials] and we are concerned about is the 'staying power' of [consumer] spending in 2002," said David Orr, chief economist at Wachovia Securities. "In particular, there is room for a large decline in motor vehicle sales in the January retail sales report."

    Click here for CNN/Money's economic calendar

    Auto sales fell only 0.1 percent after falling a revised 10.3 percent in November. A 4.2 percent drop in sales at gasoline stations led the decline in overall sales. Furniture, electronics and clothing, on the other hand, posted strong gains.

    Other reports issued Tuesday reinforced the image of stubbornly resilient consumer spending. The Bank of Tokyo-Mitsubishi and UBS Warburg, in their Weekly Chain Store Sales Snapshot, reported sales at seven major U.S. chain stores rose 0.6 percent in the week ended Jan. 12 after falling 0.6 percent the week before.

    And the Redbook Retail Sales Average compiled by Instinet Research rose 4.3 percent in the week ended Jan. 12, boosted by post-holiday clearance sales, according to a Reuters report. graphic

      RELATED STORIES

    Greenspan: economy still at risk - Jan. 11, 2002

    Fed officials cautious - Jan. 8, 2002

    Unemployment rises - Jan. 4, 2002

    What will the Fed do for an encore? - Jan. 3, 2002

    Fed makes 11th cut of 2001 - Dec. 11, 2001

      RELATED LINKS

    Retail sales report





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    Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.

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