Retail Sales Nosedived in December with Broad-based Weakness

Retail sales plunged 2.7 percent in December, the sixth consecutive decline and well-below expectations. Revisions were substantial with November falling 2.1 percent. Core retail sales, which excludes gasoline stations, building materials and autos, fell 1.4 percent. Holiday sales posted the biggest decline on record falling around 3.5 percent.

Retail Sales' Surprising December Plunge

• Overall retail sales fell 2.7 percent, the sixth consecutive decline. Retail sales are now down 7.9 percent, year over year. The biggest drop was in gasoline station sales, which fell 15.9 percent. Motor vehicles and furniture continued to decline and are now down 19.7 and 11.9 percent year over year, respectively.

Holiday Sales Fell Well Below Expectations

• Holiday sales fell around 3.5 percent, well below expectations. Sales have been primarily driven by extensive discounting which is hurting retail profit margins. Holiday items such as electronics, clothing, and sporting goods all posted declines.
• The weakness in retail sales means that consumer spending will almost certainly continue to decline in the coming quarters.

Wachovia Corporation
http://www.wachovia.com

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