US retail sales suffer steepest drop in nine years

U.S. retail sales in December suffered their worst decline in nine years, according to Commerce Department data released Thursday, a potential red flag for economic growth.

Advance estimates of December 2018 retail and food services sales, a major driver of the U.S. economy, fell 1.2 percent from the previous month, to $505.8 billion, according to the Census Bureau.

The drop is the steepest plunge in retails sales since August 2009, according to a Bloomberg News analysis of Commerce Department data.

Consumer spending is responsible for roughly 70 percent of U.S. growth and considered a key indicator of future economic conditions. The unexpected December plunge is the latest in a series of signs that growth is starting to slow after gradually accelerating since 2017.

In the wake of Thursday’s dismal sales data, J.P. Morgan slashed its projection for economic growth in the fourth quarter of 2018 from 2.6 percent to 2 percent of gross domestic product on an annualized basis.

Private- and public-sector forecasters expect the U.S. economy to slow slightly in 2019 as Europe and Asia face much steeper economic headwinds. Major European nations are bracing for a potential recession within months, and China has reported some of its weakest economic data in several years.

The U.S economy is currently projected to hold steady through the global turmoil, even if growth slows slightly due to global pressures. The economy added 312,000 jobs in December — far exceeding expectations — and there were roughly 1 million more job openings that month than workers seeking employment.

Jobs growth in January, which were reported at 304,000, was also well above expectations.

But the international slowdown and other domestic red flags have raised concerns of a more serious hit to the U.S. economy. More than 7 million Americans are more than 90 days behind on automobile payments, according to data released Tuesday from the Federal Reserve of New York, and several major U.S. consumer goods companies have reported a sharp drop in sales.

Federal Reserve Board Governor Lael Brainard said Thursday that “downside risks” to the U.S. economy “have definitely increased,” though “domestic momentum has been pretty solid.”

"We are a very international economy," Brainard said in an interview with CNBC’s “Squawk on the Street.”

"Our financial system in particular has shown itself to be very responsive to earnings abroad, to financial conditions and volatility abroad. So, yeah, I'm very attentive to the international outlook."

The Fed last month held interest rates steady after hiking them four times in 2018. Chairman Jerome Powell said the central bank would be patiently monitoring a confusing economic picture, indicating a pause in rate hikes.