Retail sales take the blame for falling market
The Dow dropped today a near 250 points (just under 3%). The Nasdaq and S&P 500 each lost over 3%. What can we attribute the declines to? Well, while reports point to a number of things including: worries over earnings, the incoming Obama administration, even questions surrounding the status of Treasury Secretary nominee Timothy Geithner (in reference to the reports of tax-evasion and his former housekeeper), the likely forerunner in causes for the drop would have to be the retail report that was published. Today, the U.S. Census Bureau released its latest nominal read of retail sales showing a decline of 2.7% from November 2008 and 9.8% decline from December 2007 on an aggregate of all items including food, fuel and healthcare services. Negative sales growth was expected but the decrease was steeper than what had been expected. It was the six month in a row retail sales have fallen which is the longest decline on record.
The big discounting may help retailers sell more products but it is also helping to drive profit margins down. Anika Khan, an economist for Wachovia, told Marketwatch that “Sales have been primarily driven by extensive discounting which is hurting retail profit margins.”
Discretionary retail sales including home furnishings, home garden and building materials, consumer electronics and department store sales also experienced another significant decline falling 6.87% compared to December 2007. Further, adjusted for inflation, “real” discretionary retail sales declined 7.48% since December 2007. Excluding a 0.7% decline in auto sales, retail sales recorded their biggest drop since record-keeping began in the early 1990s, falling 3.1%.
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