Retail sales fell 0.4% in December, an unexpected drop that capped off retailers’ worst year since 2002 and is sure to fuel rampant recession fears. “Consumer spending slowed down pretty dramatically,” one economist tells Bloomberg. “We are kind of flying very close to a stall speed.” Prognosticators had expected sales to hold steady after November’s revised 1% gain; the lag suggests that gas prices, the housing slump, and the weak job market may be catching up with consumers.
Economists project that consumer spending growth will slow to a 1.6% crawl in the first part of ’08, but don’t expect a full collapse. They’re also confidant a half-point rate cut is coming at the end of the month, which should soften any downturn. The spending slump isn’t hurting everyone, either; Wal-Mart and its discount brethren had a nice holiday.