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Thursday, January 14, 1999 Published at 15:27 GMT


Business: The Economy

Great '98 for US economy

US retail sales defy predictions of a slowdown

The US economy stood as a beacon for economic growth during 1998 finishing the year with healthy inflation and consumer spending figures.

These reflected low domestic inflation and high levels of employment, despite the threat from a sweeping worldwide recession.

Consumer prices rose just 0.1% in December giving a modest annual inflation rate of 1.6% for 1998.

The US Labor Department said this was the lowest calendar-year inflation result, and the smallest monthly rise, for 12 years. Unemployment is already at a 29 year low.

Sales holding up

Consumer spending held up with retail sales rising 0.9% from November to $231.35bn. During 1998, sales recorded a solid 5.1% gain.

However, the high number of cars leaving the forecourts masked a fall in sales at clothing and department stores, the first decline since July, according to the Commerce Department.

The signs of a slow Christmas in some retail sectors together with rising unemployment benefit claims at the end of December, will increase concerns about an expected economic slowdown in 1999.

Job blip

Applications surged 83,000 during the week before Christmas, the biggest increase in six years, but fell back in the following two weeks, the Labor Department said.

However, analysts say overall the figures remain healthy. Excluding new car sales, retail sales were up 0.4% while overall retail sales were 6.7% up on December 1997.

Charles Reingard, strategist at ABN Amro said: "It shows that 1999 is starting with momentum in the retail sales area. There's a good consumer backdrop for sales. We have a low unemployment rate and labour costs are rising above the overall pace of inflation."

Paine Webber economist Jerry Zukowski added: "How long this will sustain, we don't know. We've been looking for the demise of consumer spending for over a year."

Consumer spending accounts for two-thirds of US economic activity and was the main factor behind healthy 1998 performance.

A plunge in export sales to troubled economies in Asia led to more than 200,000 jobs going in manufacturing.

Yet the nation's unemployment rate was 4.5%, the lowest in 29 years showing that more jobs were being created than lost.





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The Economy Contents

In this section

Inquiry into energy provider loyalty

Brown considers IMF job

Chinese imports boost US trade gap

No longer Liffe as we know it

The growing threat of internet fraud

House passes US budget

Online share dealing triples

Rate fears as sales soar

Brown's bulging war-chest

Oil reaches nine-year high

UK unemployment falls again

Trade talks deadlocked

US inflation still subdued

Insolvent firms to get breathing space

Bank considered bigger rate rise

UK pay rising 'too fast'

Utilities face tough regulation

CBI's new chief named

US stocks hit highs after rate rise

US Fed raises rates

UK inflation creeps up

Row over the national shopping basket

Military airspace to be cut

TUC warns against following US

World growth accelerates

Union merger put in doubt

Japan's tentative economic recovery

EU fraud costs millions

CBI choice 'could wreck industrial relations'

WTO hails China deal

US business eyes Chinese market

Red tape task force

Websites and widgets

Guru predicts web surge

Malaysia's economy: The Sinatra Principle

Shell secures Iranian oil deal

Irish boom draws the Welsh

China deal to boost economy

US dream scenario continues

Japan's billion dollar spending spree