Retail sales dropped by 0.6 per cent in the United States last month, more than anticipated and a sign of Americans’ caution in the face of sustained inflation at the start of the holiday shopping season.

The fall in November, which exceeded economists’ expectations of a drop of about 0.1 per cent, came after an increase of 1.3 per cent in October.

Shoppers spent less on categories including electronics, clothing and cars. Retail sales comprise mostly goods and, unlike many other official data releases from the US government, this report is not adjusted for inflation. Price growth hit its highest level in a generation in America this summer, before moderating slightly. The country’s consumer prices index slipped to an annual pace of 7.1 per cent in November.

Yesterday’s retail sales reading was one of several economic releases that rattled investors. Industrial production fell by 0.2 per cent in November, driven by a 0.6 per cent drop in manufacturing activity, according to the US Federal Reserve.

Such reports have compounded apprehension over the prospect of a recession in the world’s largest economy. The Fed, having lifted US interest rates from close to zero to their highest level in 15 years, has made clear it expects to push them higher in 2023.

“The 0.6 per cent month-on-month falls in retail sales and manufacturing output in November suggest that the economy has lost some serious momentum, with the resilience of consumers to much higher interest rates starting to crumble,” Andrew Hunter, at Capital Economics, said.

The lower retail sales and the Fed’s stance on rates sent markets lower, with the Dow Jones industrial average closing down 764.13 points, or 2.6 per cent, at 33,202.22. The S&P 500 was off 2.5 per cent, or 99.57 points, at 3,895.75 and the Nasdaq was 3.2 per cent, or 360.36 points, lower at 10,810.53.