Wall Street braces for more gloomy news

WASHINGTON — The government is expected to provide fresh evidence today that retailers are taking a hit as consumers continue to pull back amid what appears to be a deepening recession.

Wall Street economists expect retail sales in November fell 1.9 percent, according to a survey by Thomson Reuters.

That would be an improvement over October’s record 2.8 percent drop, but still the fifth straight monthly decline reported by the Commerce Department.

The report comes a day after the Labor Department said initial jobless claims rose to the highest level in 26 years, though the work force has grown by about half over that time.

The jobless claims and retail reports illustrate the negative cycle currently bedeviling the economy: Consumers tighten their belts as the unemployed — and those who fear for their jobs — spend less, reducing retail sales and leading companies to cut back further.

Most Americans expect the jobs situation to get even worse, according to a poll released Thursday by the Pew Research Center for the People & the Press. More than 60 percent believe unemployment will increase next year, and 73 percent plan to cut back on holiday gifts this year.

Economists anticipate more gloomy data today. The Commerce Department is expected to report that business inventories fell by 0.2 percent in October, which would be the second straight monthly decline.

Businesses cut back on their inventories by that amount in September, the first decline since March 2007, and the biggest setback in more than three years. Inventories are closely watched signals of business confidence. When companies are reducing their stockpiles because they are worried about future sales, it can further depress overall economic growth.

And Wall Street economists expect the Labor Department to report that producer prices fell 2 percent in November. That would be the fourth consecutive drop and could fan fears about a deflationary spiral, where the economy shrinks as consumers remain on the sidelines waiting for prices to fall further.

If those predictions prove accurate, they will follow jobless claims data that were worse than already downbeat projections. Initial applications for unemployment benefits rose to a seasonally adjusted 573,000, the Labor Department said Thursday. That was nearly 50,000 more than economists were expecting and up from a revised 515,000 the week before.

Separately, the U.S. trade deficit rose unexpectedly in October to $57.2 billion, partly because of dampened demand for American exports. Analysts had been expecting a decline because of falling oil prices.