Economists lowered their fourth-quarter GDP outlook on Thursday to 2 percent from 3 percent following the latest December retail sales data.
Based on the CNBC/Moody’s Analytics Rapid Update, economists responding to the survey see growth at a median 2.4 percent pace, which is down 0.7 percentage points. The Commerce Department reported that retail sales dropped to its lowest level in nine years, which evidenced a drop in economic activity near the end of 2018 as markets were getting roiled by volatility.
“The most plausible economic explanation is that long-dormant wealth effects came back with a vengeance, and consumers slashed their holiday purchases when they saw their 401(k)’s going down the drain,” JP Morgan economists wrote. “At any rate, retailers subsequently added an above-trend 21,000 jobs in January (and private employers overall added 296,000 jobs), so it’s hard to see how that lines up with the December retail sales being the leading edge of more widespread weakness.”
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Economists polled by Reuters were forecasting retail sales to be up 0.2 percent in the month of December.
“This number was terrible,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group, in a note. “The US consumer is holding the global economy on its shoulders. After seeing today’s data, we better hope it was a one month outlier and that the rebound in stocks in January and month to date will revive consumer spending.”
Earlier this year, the National Retail Federation (NRF) projected retail sales figures to grow from 3.8 to 4.4 percent, which is lower than the 4.6 percent growth experienced in 2018. Whether it hurts the ETFs will depend on how the market interprets the data, but the NRF says the forecast comes “despite threats from an ongoing trade war, the volatile stock market and the effects of the government shutdown.”
For more information on the consumer sector, visit our consumer discretionary category.