Retail sales data suggest solid, if non-explosive, holiday season
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The Christmas retail season is one of the most important economic events of the year. Thus, observers every year eagerly await the December retail sales release from the Census Bureau to get the “final” report card on how consumers performed. 

Unfortunately, the retail sales data, while still important, have become less definitive in gauging the holiday season and the health of the consumer more generally.

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The most important reason for the diminishing importance of retail sales is that household spending has been migrating from goods to services over the past several years.  

Consumers seem to prefer travel, experiences, and entertainment over that extra pair of jeans, or a new TV for the family room. Retail sales provide an incomplete picture of household spending patterns, covering just goods and restaurants.

The more comprehensive consumer spending data, released by the Commerce Department in about two weeks, will cover all goods and services. 

In addition, the retail sales data have always been volatile, exhibiting sharp month-to-month gyrations and subject to hefty revisions in subsequent months. 

For example, in the past four months, receipts at restaurants rose by 0.7 percent in September, fell by 0.4 percent in October, surged by 1.2 percent in November, and declined by 0.8 percent last month.

Does anyone believe that households’ appetite for eating out really see-sawed in that fashion late last year?  

With those caveats in mind, what did the December retail sales report tell us about the Christmas season?  First, the tone of sales was tepid. 

Excluding autos and gasoline — the release's two most volatile components — retail sales were flat last month after rising by 0.3 percent in November — an underwhelming performance.

Reports from industry sources suggest that the official data may understate the tone of demand during the holiday shopping season somewhat. 

Retailers generally indicated that the season was solid though unspectacular.

A sizable upward swing in consumer confidence in the wake of the elections point to brighter attitudes among shoppers, and stores expressed satisfaction, though not ecstasy, with sales during the critical November-December period. 

Thus, we are left with a little bit of tension between what industry sources have said and the official data, though the differences may be ironed out to some degree after the retail sales figures have undergone a couple of months’ worth of revisions.

In contrast, the other takeaway from today’s report closely corroborates the anecdotal information trickling out this month. Online retailers enjoyed a very strong season, while brick-and-mortar stores took it on the chin. 

The Census Bureau reported that department stores registered a monthly decline in receipts (yet again), while “nonstore retailers,” a category that includes online-only retail outlets posted a notable 1.3 percent rise.  

As various reports of store closings in recent weeks underscore the rapid shift in the way that consumers shop, the official government data confirm the ongoing migration to cyberspace. In fact, many traditional retailers have responded by beefing up their web sites and shifting resources away from their physical stores.

In short, today’s retail sales data suggest more of the same. The consumer continues to spend at a solid, though certainly not explosive, clip. 

To the extent that households are purchasing goods, they are doing more of it online and services continue to be the priority for households’ discretionary dollars, which means that we will have to wait until later in the month to get a final and comprehensive read on the Christmas shopping season.

 

Stephen Stanley is the chief economist for Amherst Pierpont. Stanley is a frequent guest on CNBC and Bloomberg TV, where he has provided on-air commentary regarding the various economic indicators in U.S. financial markets.


 

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