Shoppers are propping up the economy

The American shopper — the MVP of the national, if not the global, economy — is suddenly showing signs of fatigue.Core retail sales plummeted 1.7% in December, the most in nearly two decades.Blame the December stock market chaos. Or the beginning of the government shutdown. Or even “glitches” in the data, as White House economic adviser Larry Kudlow did last week.

No matter the cause, the apparent abrupt shift in spending sent economists scrambling to mark down their forecasts for growth. Goldman Sachs trimmed its fourth-quarter GDP estimate to 1.9%. Bank of America slashed its forecast to 1.5%.Worse, the New York Federal Reserve’s “Nowcast” model for first-quarter growth has been halved to just 1.1%.

It’s a stark reminder of how it’s not just the likes of Amazon (AMZN), Macy’s (M) and Best Buy(BBY) that depend on American shoppers.“The US consumer is holding the global economy on its shoulders,” Peter Boockvar, chief investment officer at Bleakley Advisory Group, wrote in a report late last week.

That might sound like an overstatement. But recall that consumer spending makes up two-thirds of the US economy, which is the world’s largest. China is dealing with a sharp slowdown, Germany’s annual growth is at a five-year low, Brexit continues to weigh on the United Kingdom and Italy is in recession.

“We better hope it was a one-month outlier and that the rebound in stocks … will revive consumer spending,” Boockvar said.Perhaps it shouldn’t be shocking that Americans reined in spending at the end of 2018.

[Read more]