U.S retail sales may drop for the first time in 14 years

Sales at U.S. retailers may decline in 2009, the first annual drop in at least 14 years, as consumers continue to spend less and only purchase items that are discounted. Sales may fall 0.5 percent compared with a year earlier, the National Retail Federation said today in an e-mailed statement. This is the first time the trade group has forecast an annual decline since it started making sales predictions in 1995. Declining home values, the worst unemployment in almost 16 years and tightening credit are causing consumers to alter their spending habits and look for deals on everything from essential items such as food to discretionary things like clothing and televisions. “Shoppers will be seeking value and trading down to discount and off-price retailers in order to stretch their purchasing power,” NRF Chief Economist Rosalind Wells said in the statement.

Sterling rose from last week's 23-year low against the dollar on Monday after Barclays said it was not seeking fresh capital, sparking a recovery in battered UK bank shares and triggering short covering in the pound. Barclays also said expected 2008 pretax profits of more than 5.3 billion pounds included the impact of 8 billion pounds of write downs. Shares in Barclays, one of the UK's biggest bank, soared as much as 60 percent. "The fact that sterling is benefiting from the banking news suggests that it may not be the lost cause that many seem to assume it is right now," said Steve Barrow, head of G10 currency research at Standard Bank in London. Still, he said the UK currency would continue to stay weak due to concerns about the struggling banking sector and as the country continues to suffer from a recession, confirmed by data last week. The GBP/USD is currently trading at $1.4176 as of 8:45am, GMT.

The yen fell against the euro and sterling on Tuesday as Tokyo shares rose and after the Japanese government said it would offer public funds to companies whose capital is seriously hurt by the financial crisis. The yen had fallen on Monday after British bank Barclays said it would report a 2008 pretax profit and U.S. data showed a rise in home sales, giving a boost to investors' risk appetite. The USD/JPY is currently trading at 89.73 as of 8:50am, GMT.

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