ECONOMIC ROUNDUP….Three pieces of economic news today: First, holiday sales sucked:
An already weak holiday shopping season turned out to be even worse than expected for many of the nation’s retailers, who reported Thursday they had disappointing sales results for December. The poor performance raised more concerns about consumer spending, and in turn, the health of the economy.
Adjusted for inflation, December retail sales dropped about 2% compared to last year. Next up, credit card borrowing surged:
The Federal Reserve reported Tuesday that consumer borrowing climbed at an annual rate of 7.4% in November, far higher than the 1% rise in October.
The category that includes credit card debt surged at an annual rate of 11.3%, a six-month high, an indication that shoppers were relying heavily on credit cards to finance purchases since home equity lines of credit became harder to get….The 11.3% rise in credit card debt was the seventh straight month of strong gains in this area and was the biggest jump since a 12.8% rise in May.
So consumers had to max out their credit cards even though they bought less than last year. This is not good, and apparently the Fed agrees:
Ben S. Bernanke, the chairman of the Federal Reserve, sent a strong signal on Thursday that the central bank will lower interest rates again this month as it attempts to stave off a recession.
….He cited high oil prices, plummeting home prices and the struggling stock market as factors that “seem likely to weigh on consumer spending as we move into 2008.”
A lackluster employment report in December, which showed the unemployment rate rising by 0.3 percentage points, also appeared to give the chairman pause. He called the report disappointing and noted that the labor market had previously been a source of stability amid a difficult economic situation.
This is really bad news. The chickens are coming home to roost.