U.S. Starts to Push Back Against China in Growing Rift
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By HELENE COOPER
Published: January 31, 2010
WASHINGTON — For the past year, China has adopted an increasingly muscular position toward the United States, berating American officials for the global economic crisis, stage-managing President Obama’s visit to China in November, refusing to back a tougher climate change agreement in Copenhagen and standing fast against American demands for tough new Security Council sanctions against Iran.
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Pool Photo by David Gray
Prime Minister Wen Jiabao of China with President Obama during the president's visit to China last November.
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Times Topics: China
Now, the Obama administration has started to push back. In announcing an arms sales package to Taiwan worth $6 billion on Friday, the United States leveled a direct strike at the heart of the most sensitive diplomatic issue between the two countries since America affirmed the “one China” policy in 1972.
The arms package was doubly infuriating to Beijing coming so soon after the Bush administration announced a similar arms package for Taiwan in 2008, and right as tensions were easingsomewhat in Beijing and Taipei’s own relations. China’s immediate, and outraged, reaction — cancellation of some military exchanges and announcement of punitive sanctions against American companies — demonstrates, China experts said, that Beijing is feeling a little burned, particularly because the Taiwan arms announcement came on the same day that Secretary of State Hillary Rodham Clinton publicly berated China for not taking a stronger position on holding Iran accountable for its nuclear program.
While administration officials sounded a uniform public note, cautioning Beijing not to allow this latest tiff to damage overall relations, some administration officials suggested privately that the timing of the arms sales and the tougher language on Iran was calculated to send a message to Beijing to avoid assumptions that President Obama would be deferential to China over American security concerns and existing agreements.
“This was a case of making sure that there was no misunderstanding that we will act in our own national security interests,” one senior administration official said. A second Obama administration official, also speaking on the condition of anonymity because of the sensitivity of the issue, said pointedly: “Unlike the previous administration, we did not wait until the end of our administration to go ahead with the arms sales to Taiwan. We did it early.”
But larger questions remain about where the Obama administration is heading on China policy, and whether the new toughness signals a fundamentally new direction and will yield results that last year’s softer approach did not.
Beyond the wars in Afghanistan and Iraq, management of the American relationship with China is one of Mr. Obama’s biggest foreign policy challenges. Flush with cash, China’s economy is growing mightily, and China has become one of the biggest foreign lenders to the United States. China also is an increasingly critical American trading partner and a global rival in influence and economic power.
“The president’s view is that obviously we have to have a mature enough relationship with China that we can be candid and firm where we disagree and cooperate forcefully when we agree,” a senior administration official said. He insisted that the timing of the arms package and Mrs. Clinton’s tough words were “not designed to send a gratuitous message to China, but to demonstrate the firmness of our position.”
China has a history of getting off to a tough start with American administrations. President Bill Clinton alienated Beijing with tough talk on human rights, even signing an executive order that made renewal of trade privileges for China dependent on progress on human rights. But Mr. Clinton reversed himself in 1994, saying that the United States and China would move forward faster on issues of mutual concern if Beijing was not isolated.
Similarly, President George W. Bush’s first dealings with the Chinese were also fractious, including an effort to recover American airmen whose spy plane was forced down off the Chinese coast.
“The Obama administration came in exactly the opposite,” said Steven Clemons, director of foreign policy programs at the New America Foundation. “They needed China on economic issues, climate change, Iran, North Korea. So they came in wanting to do this lovely dance with China, but that didn’t work.”
Instead, China pushed back hard, including at the Copenhagen climate change summit meeting in December, when Beijing balked at American and European demands that China agree to an international monitoring system for emissions targets. Twice, the Chinese prime minister, Wen Jiabao, sent an underling to represent him at meetings with Mr. Obama, in what diplomats said was an intentional snub. Mr. Obama later had to track down Mr. Wen, surprising him and appearing at the doorway of a conference room where Mr. Wen was meeting with the leaders of South Africa, Brazil and India.
The United States and China eventually reached a compromise on the monitoring agreement, but the whole incident left a bad taste in the mouths of many Obama administration officials, who believed China had deliberately set out to belittle Mr. Obama, and who were determined to push back and reassert American authority.
“The Chinese,” said James J. Shinn, who was assistant secretary of defense for Asia during the Bush administration, “now seem to have a palpable sense of confidence that they’re more in the driver’s seat than two years ago, across a whole range of issues.”
For Mr. Obama, the arms sale to Taiwan, which China considers a breakaway province, may be only the first of many instances this year in which he will run afoul of Beijing.
Some foreign policy experts said that the administration now seemed intent on poking at the sovereignty issues that have long been China’s Achilles’ heel. Mrs. Clinton noted on Friday that Mr. Obama would soon be meeting with the Tibetan spiritual leader, the Dalai Lama — a meeting that White House officials put off last summer to avoid alienating Beijing in advance of Mr. Obama’s China trip. China regards the Dalai Lama as an advocate of Tibetan independence.
“China is feeling very confident these days, but the one thing that the Chinese freak out about consistently are sovereignty issues,” said Mr. Clemons of the New America Foundation. “So anything related to Taiwan or Tibet will get them going.”
Added to that, the administration has been championing Internet freedom recently, another source of public tension with Beijing. China’s government is embroiled in a fight with Google over that company’s complaints about Internet censorship and hacking attacks it says originated in China.
But the tougher American positions do not change the fact that Mr. Obama needs Chinese cooperation on a host of issues. Beyond his efforts to rein in Iran’s nuclear ambitions, the president is also working with Beijing on similar ambitions in North Korea.
And Mr. Obama announced in his State of the Union address last week that he planned to double American exports in the next five years, an ambitious goal that cannot be met unless he somehow persuades China to let its currency appreciate, making Chinese products more expensive in the United States and American products more affordable in China.
Sunday, January 31, 2010
Saturday, January 30, 2010
arms package to Taiwan angers China
BEIJING — China suspended military exchanges with the United States, threatened unprecedented sanctions against American defense companies and warned Saturday that cooperation would suffer after Washington announced $6.4 billion in planned arms sales to Taiwan.
The response to Friday's U.S. announcement, while not entirely unexpected, was swift and indicated that China plans to put up a greater challenge than usual as it deals with the most sensitive topic in U.S.-China relations.
"This is the strongest reaction we've seen so far in recent years," said Stephanie T. Kleine-Ahlbrandt, northeast Asia project director for the International Crisis Group. "China is really looking to see what kind of reaction it's going to receive from Obama on this."
China's Defense Ministry said the arms sales to self-governing Taiwan, which the mainland claims as its own, cause "severe harm" to overall U.S.-China cooperation, the state-run Xinhua News Agency reported. Vice ministerial-level talks on arms control and strategic security were postponed.
The warning comes as the U.S. seeks Beijing's help on issues including the global financial crisis and nuclear standoffs in North Korea and Iran. Tensions were already high after recent U.S. comments on Internet freedom and a dispute between Google and China, as well as President Barack Obama's plan to meet with Tibetan spiritual leader the Dalai Lama this year.
China's Vice Foreign Minister He Yafei told U.S. Ambassador Jon Huntsman that the sales of Black Hawk helicopters, Patriot Advanced Capability-3 missiles and other weapons to Taiwan would "cause consequences that both sides are unwilling to see," a ministry statement said.
The Foreign Ministry also threatened sanctions against U.S. companies involved in the arms sales, which hasn't happened in past sales to Taiwan.
"Our action regarding Taiwan reinforces our commitment to stability in the region," U.S. State Department spokesman P.J. Crowley said Saturday. "We know China has a different view. Given our broad relationship with China, we will manage this issue as we have in the past."
Story continues below
The United States is Taiwan's most important ally and largest arms supplier, and it's bound by law to ensure the island is able to respond to Chinese threats.
China responds angrily to any proposed arms sales, however, and it also cut off military ties with the U.S. in 2008 after the former Bush administration announced a multibillion-dollar arms sale to Taiwan.
A similar cutoff of military ties was expected this time, but it comes as Washington and Beijing wanted to improve normally frosty relations between their armed forces. The U.S. has tried to use military visits to build trust with Beijing and learn more about the aims of its massive military buildup.
"In the past, these kinds of suspensions have lasted for three to six months, with some parts of the military-to-military relationship suspended beyond that," said Phillip Saunders, a distinguished research fellow at the National Defense University in Washington. "I expect something similar this time."
It's not known whether the arms sale will affect President Hu Jintao's expected visit to the U.S. this year or a summit on nuclear safety in the U.S. this spring.
Experts on China warned Beijing could take further steps to punish the United States to show its newfound power and confidence in world affairs.
Jin Canrong, a professor of international studies at China's Renmin University, said the sale would give Beijing a "fair and proper reason" to accelerate weapons testing. China test-fired rockets in recent weeks for an anti-missile defense system in what security experts said was a display of anger at the pending arms sale.
"The U.S. will pay a price for this. Starting now, China will make some substantial retaliation, such as reducing cooperation on the North Korea and Iran nuclear issues and anti-terrorism work," Jin added.
The latest suspension of military ties should affect planned visits to China by U.S. Secretary of Defense Robert Gates and Admiral Michael Mullen, chairman of the U.S. Joint Chiefs of Staff. A visit to the U.S. by the Chinese military's chief of the general staff, Gen. Chen Bingde, could also be called off.
The U.S. Congress has 30 days to comment on the newest arms sales before the plan goes forward. Lawmakers traditionally have supported such sales.
Though Taiwan's ties with China have warmed considerably since Taiwanese President Ma Ying-jeou took office 20 months ago, Beijing has threatened to invade if the island ever formalizes its de facto independence. China has more than 1,000 ballistic missiles aimed at Taiwan.
China often argues that arms sales to Taiwan hurt their relations, but Saunders said that despite the latest announcement and the one in 2008, "cross-Strait relations have never been better."
The arms package announced Friday dodged a thorny issue: The more advanced F-16 fighter jets that Taiwan covets are not included.
The Pentagon's decision not to include the fighters and a design plan for diesel submarines – two items Taiwan wants most – "shows that the Obama administration is deeply concerned about China's response," said Wang Kao-cheng, a defense expert at Taipei's Tamkang University.
Taiwan's Ma told reporters Saturday that the deal should not anger the mainland because the weapons are defensive, not offensive.
___
Associated Press writers Foster Klug and Robert Burns in Washington, Charles Hutzler in Beijing and Annie Huang in Taipei contributed to this report.
The response to Friday's U.S. announcement, while not entirely unexpected, was swift and indicated that China plans to put up a greater challenge than usual as it deals with the most sensitive topic in U.S.-China relations.
"This is the strongest reaction we've seen so far in recent years," said Stephanie T. Kleine-Ahlbrandt, northeast Asia project director for the International Crisis Group. "China is really looking to see what kind of reaction it's going to receive from Obama on this."
China's Defense Ministry said the arms sales to self-governing Taiwan, which the mainland claims as its own, cause "severe harm" to overall U.S.-China cooperation, the state-run Xinhua News Agency reported. Vice ministerial-level talks on arms control and strategic security were postponed.
The warning comes as the U.S. seeks Beijing's help on issues including the global financial crisis and nuclear standoffs in North Korea and Iran. Tensions were already high after recent U.S. comments on Internet freedom and a dispute between Google and China, as well as President Barack Obama's plan to meet with Tibetan spiritual leader the Dalai Lama this year.
China's Vice Foreign Minister He Yafei told U.S. Ambassador Jon Huntsman that the sales of Black Hawk helicopters, Patriot Advanced Capability-3 missiles and other weapons to Taiwan would "cause consequences that both sides are unwilling to see," a ministry statement said.
The Foreign Ministry also threatened sanctions against U.S. companies involved in the arms sales, which hasn't happened in past sales to Taiwan.
"Our action regarding Taiwan reinforces our commitment to stability in the region," U.S. State Department spokesman P.J. Crowley said Saturday. "We know China has a different view. Given our broad relationship with China, we will manage this issue as we have in the past."
Story continues below
The United States is Taiwan's most important ally and largest arms supplier, and it's bound by law to ensure the island is able to respond to Chinese threats.
China responds angrily to any proposed arms sales, however, and it also cut off military ties with the U.S. in 2008 after the former Bush administration announced a multibillion-dollar arms sale to Taiwan.
A similar cutoff of military ties was expected this time, but it comes as Washington and Beijing wanted to improve normally frosty relations between their armed forces. The U.S. has tried to use military visits to build trust with Beijing and learn more about the aims of its massive military buildup.
"In the past, these kinds of suspensions have lasted for three to six months, with some parts of the military-to-military relationship suspended beyond that," said Phillip Saunders, a distinguished research fellow at the National Defense University in Washington. "I expect something similar this time."
It's not known whether the arms sale will affect President Hu Jintao's expected visit to the U.S. this year or a summit on nuclear safety in the U.S. this spring.
Experts on China warned Beijing could take further steps to punish the United States to show its newfound power and confidence in world affairs.
Jin Canrong, a professor of international studies at China's Renmin University, said the sale would give Beijing a "fair and proper reason" to accelerate weapons testing. China test-fired rockets in recent weeks for an anti-missile defense system in what security experts said was a display of anger at the pending arms sale.
"The U.S. will pay a price for this. Starting now, China will make some substantial retaliation, such as reducing cooperation on the North Korea and Iran nuclear issues and anti-terrorism work," Jin added.
The latest suspension of military ties should affect planned visits to China by U.S. Secretary of Defense Robert Gates and Admiral Michael Mullen, chairman of the U.S. Joint Chiefs of Staff. A visit to the U.S. by the Chinese military's chief of the general staff, Gen. Chen Bingde, could also be called off.
The U.S. Congress has 30 days to comment on the newest arms sales before the plan goes forward. Lawmakers traditionally have supported such sales.
Though Taiwan's ties with China have warmed considerably since Taiwanese President Ma Ying-jeou took office 20 months ago, Beijing has threatened to invade if the island ever formalizes its de facto independence. China has more than 1,000 ballistic missiles aimed at Taiwan.
China often argues that arms sales to Taiwan hurt their relations, but Saunders said that despite the latest announcement and the one in 2008, "cross-Strait relations have never been better."
The arms package announced Friday dodged a thorny issue: The more advanced F-16 fighter jets that Taiwan covets are not included.
The Pentagon's decision not to include the fighters and a design plan for diesel submarines – two items Taiwan wants most – "shows that the Obama administration is deeply concerned about China's response," said Wang Kao-cheng, a defense expert at Taipei's Tamkang University.
Taiwan's Ma told reporters Saturday that the deal should not anger the mainland because the weapons are defensive, not offensive.
___
Associated Press writers Foster Klug and Robert Burns in Washington, Charles Hutzler in Beijing and Annie Huang in Taipei contributed to this report.
what this says about the"establishment
Finally, the iPad is proof positive that Apple has the financial resources to develop completely new products from the ground up. The fact that Apple designed and manufactured its own processor specifically for the iPad speaks volumes about the company's vitality, even in an uncertain economy. And it bodes well for Apple's ability to innovate in the years ahead.
Thursday, January 14, 2010
THURSDAY JANUARY 14
5:21 PM ET: China has 'dismissed' Google's threat to leave the country.
The Financial Times reports:
One of China's top propaganda officials on Thursday reaffirmed the state's commitment to censoring the internet, showing no sign of compromising in the face of Google's threat to quit the country.
Wang Chen, head of the State Council Information Office and deputy head of the Communist party's propaganda department, said internet media "must live up to their responsibility of maintaining internet security".
4:14 PM ET: The White House has officially endorsed Google's position.
MarketWatch cites White House spokesperson Robert Gibbs:
"We support [Google's] action ... in a decision to no longer censor searches that happen using the [Google] platform," Gibbs told reporters. He added that "our concern is with actions that threaten the universal rights of a free Internet."
According to MarketWatch, President Barack Obama "supports Google Inc.'s decision to stop voluntarily censoring its search results in China, even though the move could imperil the company's ability to do business in a prized international market."
3:50 PM ET: Get a visual summary of the what China censors and blocks online.
Story continues below
David McCandless, via Fast Company, has created an infographic illustrating what material and sites are censored by the Chinese government. See it below:
5:21 PM ET: China has 'dismissed' Google's threat to leave the country.
The Financial Times reports:
One of China's top propaganda officials on Thursday reaffirmed the state's commitment to censoring the internet, showing no sign of compromising in the face of Google's threat to quit the country.
Wang Chen, head of the State Council Information Office and deputy head of the Communist party's propaganda department, said internet media "must live up to their responsibility of maintaining internet security".
4:14 PM ET: The White House has officially endorsed Google's position.
MarketWatch cites White House spokesperson Robert Gibbs:
"We support [Google's] action ... in a decision to no longer censor searches that happen using the [Google] platform," Gibbs told reporters. He added that "our concern is with actions that threaten the universal rights of a free Internet."
According to MarketWatch, President Barack Obama "supports Google Inc.'s decision to stop voluntarily censoring its search results in China, even though the move could imperil the company's ability to do business in a prized international market."
3:50 PM ET: Get a visual summary of the what China censors and blocks online.
Story continues below
David McCandless, via Fast Company, has created an infographic illustrating what material and sites are censored by the Chinese government. See it below:
Number Of U.S. Business Start-Ups Drop 24%,
Number Of U.S. Business Start-Ups Drop 24%, Leading Global Decline
Huffington Post | Grace Kiser First Posted: 01-14-10 01:32 PM | Updated: 01-14-10 04:49 PM
Share Comments 18
Politicians love to repeat that small businesses are the "engine of our economy." But, according to a new report, that engine is in need of serious repair.
The number of new businesses launched in the U.S. declined 24 percent in the United States in 2009 and 10 percent in the 20 most affluent countries over the same period, according to the annual Global Entrepreneurship Monitor.
The GEM conducted 180,000 interviews in 54 countries in 2009 and found a year-over-year decline in the number of people around the world who thought there were attractive opportunities for business formation.
For an increasing number of people in the world's richest countries, the impetus to start a business was driven by necessity. But interestingly, a small number perceived an increase in opportunity during -- and because of -- the recession. Of this optimistic segment of survey respondents, Niels Bosma, the report's director of research, told the WSJ:
"What surprised me was that as much as one in four new entrepreneurs in wealthy countries believed that the global slowdown had created more opportunities for their business, not less. This is a significant and interesting group. They are more likely to be young, well-educated and expect to create a lot of jobs for others."
Another particularly striking finding in the study was that the rate of Americans entering into entrepreneurship seemed to slow even before the financial crisis started. Based on the data, "the American population acted from around 2006 as if it anticipated trouble ahead." Here's the report:
"From 2006 through 2009, fear of failure rose, as did the share of necessity-driven entrepreneurship, while nascent entrepreneurial activity dropped from a high of 8% in 2005 to 5% in 2009. While new entrepreneurial activity is a smoothed measure, it too showed a decline."
For would-be start-ups, the report found, funding remains tight. Venture capital investment declined considerably in 2008 and 2009. Actually, according to the report, "in the United States a person has a higher chance of winning a million dollars or more in a state lottery than getting venture capital to launch a new venture." In 2008, venture capital helped to fund only about 15,000 start-ups, but informal investment -- from founders and/or their friends, family, and colleagues -- helped pay for tens of millions of new business initiatives.
Read the full report here.
Huffington Post | Grace Kiser First Posted: 01-14-10 01:32 PM | Updated: 01-14-10 04:49 PM
Share Comments 18
Politicians love to repeat that small businesses are the "engine of our economy." But, according to a new report, that engine is in need of serious repair.
The number of new businesses launched in the U.S. declined 24 percent in the United States in 2009 and 10 percent in the 20 most affluent countries over the same period, according to the annual Global Entrepreneurship Monitor.
The GEM conducted 180,000 interviews in 54 countries in 2009 and found a year-over-year decline in the number of people around the world who thought there were attractive opportunities for business formation.
For an increasing number of people in the world's richest countries, the impetus to start a business was driven by necessity. But interestingly, a small number perceived an increase in opportunity during -- and because of -- the recession. Of this optimistic segment of survey respondents, Niels Bosma, the report's director of research, told the WSJ:
"What surprised me was that as much as one in four new entrepreneurs in wealthy countries believed that the global slowdown had created more opportunities for their business, not less. This is a significant and interesting group. They are more likely to be young, well-educated and expect to create a lot of jobs for others."
Another particularly striking finding in the study was that the rate of Americans entering into entrepreneurship seemed to slow even before the financial crisis started. Based on the data, "the American population acted from around 2006 as if it anticipated trouble ahead." Here's the report:
"From 2006 through 2009, fear of failure rose, as did the share of necessity-driven entrepreneurship, while nascent entrepreneurial activity dropped from a high of 8% in 2005 to 5% in 2009. While new entrepreneurial activity is a smoothed measure, it too showed a decline."
For would-be start-ups, the report found, funding remains tight. Venture capital investment declined considerably in 2008 and 2009. Actually, according to the report, "in the United States a person has a higher chance of winning a million dollars or more in a state lottery than getting venture capital to launch a new venture." In 2008, venture capital helped to fund only about 15,000 start-ups, but informal investment -- from founders and/or their friends, family, and colleagues -- helped pay for tens of millions of new business initiatives.
Read the full report here.
2009 Sales See Biggest Drop In 27 Years
December Retail Sales Drop .3 Percent, 2009 Sales See Biggest Drop In 27 Years
BY MARTIN CRUTSINGER | 01/14/10 09:00 AM |
The Commerce Department said Thursday that retail sales declined 0.3 percent in December compared with November, much weaker than the 0.5 percent rise that economists had been expecting. Excluding autos, sales dropped by 0.2 percent, also weaker than the 0.3 percent rise analyst had forecast.
For the year, sales fell 6.2 percent, the biggest decline on records that go back to 1992. The only other year that annual sales fell was in 2008, when they slipped by 0.5 percent.
The 0.3 percent decline in December was the first setback since September, when sales had fallen 2 percent. Sales posted strong gains of 1.2 percent in October and 1.8 percent in November, raising hopes that the consumer is starting to mount a comeback.
Consumer spending is considered critical to any sustained economic revival since consumer spending accounts for 70 percent of total economic activity.
The December drop in sales was a surprise given that the nation's big retailers had reported better-than-expected results last week, reflecting a surge of last-minute holiday shopping. But even with the rebound reported by the nation's biggest chains, these retailers suffered their worst annual performance in more than four decades in 2008, according to data from the International Council of Shopping Centers.
The 6.2 percent fall in the government's retail sales figure is only the second decline on records that go back to 1992. In all other years, even during previous recessions, retail sales, which are not adjusted for inflation, have managed to increase.
Story continues below
For December, sales of autos dropped by 0.8 percent following a 1.2 percent rise in November.
Sales at specialty clothing stores fell by 0.6 percent while sales at general merchandise stores, a category that includes big retailers such as Wal-Mart, were down by 0.8 percent while sales at department stores were flat.
Sales at electronics and appliance stores dropped by 2.6 percent and sales at hardware stores dropped by 0.4 percent.
The weakness over the year reflected the battering that consumers have taken from the worst recession since the Great Depression, a downturn that has cost 7.2 million jobs and left households trying to rebuild savings depleted by losses on Wall Street and a crash in housing prices.
Economists are worried about consumer spending in the months ahead given their forecasts that unemployment, currently at 10 percent, will keep rising until perhaps midyear.
The overall economy, as measured by the gross domestic product, grew at an annual rate of 2.2 percent in the July-September quarter and many economists believe that growth strengthened even further in the final three months of last year. However, the worry is that GDP will slow significantly in the early part of 2010 unless consumers continue to spend.
For December, a diverse group of retailers including Costco Wholesale Corp., Target Corp., Macy's Inc. and TJX all reported increases. Luxury stores like Saks Inc. and Nordstrom also saw strong December sales gains and even Sears Holdings posted a small gain on rising sales at its Kmart chain.
Also helping to support retail spending in December was a hint of better days ahead for the battered auto industry. Automakers in the United States ended their worst year in almost three decades in December with slight improvements, led by gains in sales of small cars.
BY MARTIN CRUTSINGER | 01/14/10 09:00 AM |
The Commerce Department said Thursday that retail sales declined 0.3 percent in December compared with November, much weaker than the 0.5 percent rise that economists had been expecting. Excluding autos, sales dropped by 0.2 percent, also weaker than the 0.3 percent rise analyst had forecast.
For the year, sales fell 6.2 percent, the biggest decline on records that go back to 1992. The only other year that annual sales fell was in 2008, when they slipped by 0.5 percent.
The 0.3 percent decline in December was the first setback since September, when sales had fallen 2 percent. Sales posted strong gains of 1.2 percent in October and 1.8 percent in November, raising hopes that the consumer is starting to mount a comeback.
Consumer spending is considered critical to any sustained economic revival since consumer spending accounts for 70 percent of total economic activity.
The December drop in sales was a surprise given that the nation's big retailers had reported better-than-expected results last week, reflecting a surge of last-minute holiday shopping. But even with the rebound reported by the nation's biggest chains, these retailers suffered their worst annual performance in more than four decades in 2008, according to data from the International Council of Shopping Centers.
The 6.2 percent fall in the government's retail sales figure is only the second decline on records that go back to 1992. In all other years, even during previous recessions, retail sales, which are not adjusted for inflation, have managed to increase.
Story continues below
For December, sales of autos dropped by 0.8 percent following a 1.2 percent rise in November.
Sales at specialty clothing stores fell by 0.6 percent while sales at general merchandise stores, a category that includes big retailers such as Wal-Mart, were down by 0.8 percent while sales at department stores were flat.
Sales at electronics and appliance stores dropped by 2.6 percent and sales at hardware stores dropped by 0.4 percent.
The weakness over the year reflected the battering that consumers have taken from the worst recession since the Great Depression, a downturn that has cost 7.2 million jobs and left households trying to rebuild savings depleted by losses on Wall Street and a crash in housing prices.
Economists are worried about consumer spending in the months ahead given their forecasts that unemployment, currently at 10 percent, will keep rising until perhaps midyear.
The overall economy, as measured by the gross domestic product, grew at an annual rate of 2.2 percent in the July-September quarter and many economists believe that growth strengthened even further in the final three months of last year. However, the worry is that GDP will slow significantly in the early part of 2010 unless consumers continue to spend.
For December, a diverse group of retailers including Costco Wholesale Corp., Target Corp., Macy's Inc. and TJX all reported increases. Luxury stores like Saks Inc. and Nordstrom also saw strong December sales gains and even Sears Holdings posted a small gain on rising sales at its Kmart chain.
Also helping to support retail spending in December was a hint of better days ahead for the battered auto industry. Automakers in the United States ended their worst year in almost three decades in December with slight improvements, led by gains in sales of small cars.
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