US recession risks grow as retail sales disappoint in September

(Alliance News) - Drab US retail spending figures, released on Friday, will do little to dispel the notion the largest economy in the world is on course for a recession.

US retail sales in September disappointed as they remained flat, data from the Census Bureau showed on Friday. US retail sales in September remained unchanged to revised figures from August, below a market consensus expecting monthly growth of 0.2%, according to FXstreet. September's unchanged figure slowed from August's 0.4% growth from July.

ING Chief International Economist James Knightley said the figures were "not terrible" but they will not "exactly instil confidence either".

"The key point though is that this nominal spending growth is not keeping pace with inflation. It implies that volume numbers are under massive pressure and recession risks are growing well before the full effects of Federal Reserve rate hikes are felt," he added.

On Thursday, figures showed consumer prices rose 0.4% in September versus the prior month, picking up pace from August's 0.1% rise. Market expectations were for a 0.2% rise.

As a result, Knightley feel US GDP forecasts should be trimmed.

"We will be lucky to get 1% growth at this rate. With the Fed still hiking interest rates aggressively officials are right to warn of more economic pain to come," he added.

Annually, retail sales grew 8.2% in September, behind August's 9.4% rise.

Stripping out motor vehicles & parts, sales grew 0.1% month-on-month in September, in line with expectations.

Motor vehicle & parts dealers' sales contracted by 0.4% in September, reversing 2.8% growth in August.

Gasoline stations increased sales by 21% from a year ago, but fell 1.4% compared to August. Nonstore retailers grew by 12% in the year and 0.5% over the month.

Capital Economics Senior US Economist Andrew Hunter said: "With retail sales unchanged in September there is still little evidence that the boost to purchasing power from the earlier sharp fall in gasoline prices has helped real consumption. Energy prices are now edging higher again and employment growth is slowing, so we expect consumption growth to weaken further over the coming months.

"The upshot is that we still expect consumption growth over the third quarter as a whole to have slumped to only 0.7% annualised and, with the impact of the Fed’s aggressive tightening still feeding through, we suspect growth will be even weaker in the fourth quarter."

By Paul McGowan; [email protected]

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