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US economic data point to moderate economic growth

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WASHINGTON: US retail sales increased for a third straight month in December, with households buying a range of goods even as they cut back on purchases of motor vehicles, suggesting the economy maintained a moderate growth pace at the end of 2019.


Other data on Thursday showed the number of Americans filing claims for unemployment benefits dropped for a fifth straight week last week, indicating the labour market remained strong despite a recent slowdown in job growth. That should help sustain consumer spending and probably keep the longest economic expansion on record, now in its 11th year, on track.


The Federal Reserve on Wednesday described the economy as having continued to expand modestly in the final six weeks of 2019. The US central bank has signalled that it could keep interest rates unchanged at least through this year after reducing borrowing costs three times in 2019.


“There’s more fuel in the tank of this economic expansion,” said Chris Rupkey, chief economist at MUFG in New York. The Commerce Department said retail sales increased 0.3 per cent last month. Data for November was revised up to show retail sales gaining 0.3 per cent instead of rising 0.2 per cent as previously reported. Economists polled by Reuters had forecast retail sales would gain 0.3 per cent in December. Compared to December of last year, retail sales accelerated 5.8 per cent. Sales increased 3.6 per cent in 2019.


Excluding automobiles, gasoline, building materials and food services, retail sales rebounded 0.5 per cent last month after falling by a downwardly revised 0.1 per cent in November.


The so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. They were previously reported to have edged up 0.1 per cent in November. Core retail sales for October were also revised lower.


Overall sales rose in December despite retailers such as Target Corp, Kohl’s, J C Penney and Macy’s reporting a decline in sales for the holiday period as foot traffic in malls dropped.


Though a report last week showed a slowdown in job growth in December and the increase in the annual wage gain retreating to below 3.0 per cent, the labour market remains on solid footing. In a separate report on Thursday, the Labour Department said initial claims for state unemployment benefits dropped 10,000 to a seasonally adjusted 204,000 for the week ended January 11.


Economists had forecast claims would rise to 216,000 in the latest week.


While claims are trending lower, there are some worrying signs emerging. The claims data showed layoffs in manufacturing, transportation and warehousing, construction, educational services and accommodation and food services industries in late 2019 and early 2020.


Some of the job losses in manufacturing, which were spread across at least eight states, could be related to the 18-month trade war between the United States and China, which has hurt business confidence and undercut capital expenditure. US President Donald Trump and Chinese Vice Premier Liu He signed a “Phase 1” trade deal on Wednesday, a first step towards defusing the trade war.


A third report on Thursday from the Philadelphia Fed showed factory activity in the mid-Atlantic region accelerated in January, with manufacturers reporting receiving more orders.


But a measure of unfilled orders at factories in the region that covers eastern Pennsylvania, southern New Jersey and Delaware contracted and manufacturers cut hours for employees. — Reuters


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