Retail sales fall to deepen recession

Source: Retail Digital

Date :14/03/2008 02:23:29

U.S. retail sales fell 0.6 percent since January as customers are very cautious following reports of an economic recession.

The steep decline was three times greater than analysts were predicting, triggering talk of yet further cuts to interest rates.

Economic momentum depends largely on consumer spending, so the Federal Reserve is keen to encourage greater consumer activity and stabilize the economy in the current period of turmoil.

BMO Capital Markets economist Sal Guatieri asserts that this is “the final piece in the recession puzzle, upping the odds of a 0.75 percentage point Fed rate cut on Tuesday.”

Having already cut rates by 2.25 points since September, this like move would put Fed rates at a little over two percent. This will only slow the problem, however, President George W. Bush pointing to the importance of increasing consumer spending for long-term economic stability.

Confidence

The White House has stressed the need for consumers to have confidence in the lasting strength of the economy, and to resume spending as normal. “We do want the consumer to spend,” said White House spokesman Tony Fratto. “The big message is that you can have confidence in the long-term future of our economy.”

Robert Brusca of FAO Economics was keen to state that “on balance, the data are bad but not terrible.” He went on to say that it was still not clear whether the weakness was sufficient to cause negative GDP growth in the first quarter.

March 14, 2008