BBC: US retail sales 'to slow' in 2005

US retail sales 'to slow' in 2005

Retail sales growth in the United States will slow in 2005 as consumers are hit by higher energy costs and slower wage growth, a report has said.

According to the National Retail Federation, sales of general merchandise - including clothing and furniture - will rise 3.5% this year.

This compares to 6.7% growth in 2004, the highest figure for five years.

The NRF said the retail sector would be hit by rising interest rates and persistently-high fuel costs.

Slowdown

"This year, consumers will be under increased financial pressure due to higher energy costs and slow wage growth," said Rosalind Wells, the Federation's chief economist.

"Additionally, past stimuli provided by tax cuts and very low interest rates will no longer be there to boost consumer spending."

Consumer spending is closely watched in the US as it accounts for about two thirds of all economic activity.

According to the NRF's figures, the recent Christmas sales season outperformed 2003, with sales rising 5.7% compared to 5.15% the year before.

However, the organisation said that higher interest rates and slowing wage growth would dampen consumer demand in the second half of 2005.

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Prudent Investor says

This certainly bodes ill for the US equity markets.