| Consensus | Consensus Range | Actual | Previous | Revised | |
|---|---|---|---|---|---|
| Retail Sales - M/M | -0.8% | -1.5% to 0.0% | -1.1% | -0.6% | -1.0% |
| Ex-Vehicles - M/M | -0.5% | -0.8% to 0.4% | -1.1% | -0.2% | -0.6% |
| Ex-Vehicles & Gas - M/M | -0.1% | -0.2% to 0.5% | -0.7% | -0.2% | -0.5% |
Highlights
Retail and food services sales are down 1.1 percent in December after a downward revision to down 1.0 percent in November and up 1.1 percent in October. The December decline is below the down 0.8 percent consensus in an Econoday survey. The weaker than expected December combined with the softer performances in the prior two months sets up the advance estimate for third quarter GDP to be lower than previously thought with personal consumption expenditures less supportive of growth.
Retail and food services sales excluding motor vehicles are also down 1.1 percent in December on top of downward revisions to down 0.6 percent in November and up 1.0 percent in October. Sales of motor vehicles and parts are down 1.2 percent in December.
Gasoline sales are down 4.6 percent in December from November, reflecting the decline in prices at the pump. Sales excluding gasoline only are down 0.8 percent. Sales excluding gasoline and motor vehicles are down 0.7 percent month-over-month.
Sales at nonstore retailers which includes online shopping are down 1.1 percent in December. Some of that may be due to lower prices for commodities like home heating fuels, but it suggests that online shopping suffered a similar trend in with the lackluster holiday results at brick-and-mortar stores.
Weakness in December sales is widespread. The only increases are a small 0.3 percent rise for building materials, and increases of 0.1 percent in grocery stores and sporting goods, respectively. These are minor gains that do not offset the broad-based softness in the December report.
Retail and food services sales excluding motor vehicles are also down 1.1 percent in December on top of downward revisions to down 0.6 percent in November and up 1.0 percent in October. Sales of motor vehicles and parts are down 1.2 percent in December.
Gasoline sales are down 4.6 percent in December from November, reflecting the decline in prices at the pump. Sales excluding gasoline only are down 0.8 percent. Sales excluding gasoline and motor vehicles are down 0.7 percent month-over-month.
Sales at nonstore retailers which includes online shopping are down 1.1 percent in December. Some of that may be due to lower prices for commodities like home heating fuels, but it suggests that online shopping suffered a similar trend in with the lackluster holiday results at brick-and-mortar stores.
Weakness in December sales is widespread. The only increases are a small 0.3 percent rise for building materials, and increases of 0.1 percent in grocery stores and sporting goods, respectively. These are minor gains that do not offset the broad-based softness in the December report.
Market Consensus Before Announcement
Retail sales are expected to fall 0.8 percent in December on top of November's weaker-than-expected 0.6 percent decline. Ex-vehicle sales slipped 0.2 percent in November with this measure expected to fall 0.5 percent in December. When excluding both vehicles and gasoline, sales are expected to edge 0.1 percent lower.
Definition
Retail sales measure the total receipts at stores that sell merchandise and related services to final consumers. Sales are by retail and food services stores. Data are collected from the Monthly Retail Trade Survey conducted by the U.S. Bureau of the Census. Essentially, retail sales cover the durables and nondurables portions of consumer spending. Consumer spending typically accounts for about two-thirds of GDP and is therefore a key element in economic growth. Of special attention is the control group; this is an input into the consumer spending component of GDP and excludes food services, autos, gasoline and building materials.
Description
Consumer spending accounts for more than two-thirds of the economy, so if you know how the consumer sector is faring, you'll have a pretty good handle on where the economy is headed. Needless to say, that's a big advantage for investors.
The pattern in consumer spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth becomes excessive and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth. Retail sales not only give you a sense of the big picture, but also the trends among different types of retailers. Perhaps auto sales are especially strong or apparel sales are showing exceptional weakness. These trends from the retail sales data can help you spot specific investment opportunities, without having to wait for a company's quarterly or annual report.
Balance was achieved through much of the nineties. For this reason alone, investors in the stock and bond markets enjoyed huge gains during the bull market of the 1990s. Retail sales growth did slow down in tandem with the equity market in 2000 and 2001, but then rebounded at a healthy pace between 2003 and 2005. By 2007, the credit crunch was well underway and starting to undermine growth in consumer spending. Later in 2008 and 2009, the rise in unemployment and loss of income during the recession also cut into retail sales. Spending rebounded in 2010 and 2011 but was constrained by lingering high unemployment.
Importance
Retail sales are a major indicator of consumer spending trends because they account for nearly one-half of total consumer spending and approximately one-third of aggregate economic activity. The control group for retail sales (which excludes restaurants, vehicles, gasoline and building materials) is an input into GDP and offers a narrower look at nondiscretionary spending.
Interpretation
Strong retail sales are bearish for the bond market, but favorable for the stock market, particularly retail stocks. Sluggish retail sales could lead to a bond market rally, but will probably be bearish for the stock market.
Retail sales are subject to substantial month-to-month variability. In order to provide a more accurate picture of the consumer spending trend, follow the three-month moving average of the monthly percent changes or the year-over-year percent change. Retail sales are also subject to substantial monthly revisions, which makes it more difficult to discern the underlying trend. This problem underscores the need to monitor the moving average rather than just the latest one month of data.
In an attempt to avoid the more extreme volatility, economists and financial market participants monitor retail sales less autos (actually less auto dealers which include trucks, too.) Motor vehicle sales are excluded not because they are irrelevant, but because they fluctuate more than overall retail sales. In recent years, many analysts consider the core series to be total less autos and less gasoline service station sales. The latter is volatile due to swings in oil and gasoline prices.
Price changes affect the real value of retail sales. Watch for changes in food and energy prices which could affect two large components among nondurable goods stores: food stores and gasoline service stations. Large declines in food or energy prices could lead to declines in store sales which are due to price, not volume. This would mean that real sales were stronger than nominal dollar sales.
Since economic performance depend on real, rather than nominal growth rates, compare the trend growth rate in retail sales to that in the CPI for commodities.
The pattern in consumer spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth becomes excessive and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth. Retail sales not only give you a sense of the big picture, but also the trends among different types of retailers. Perhaps auto sales are especially strong or apparel sales are showing exceptional weakness. These trends from the retail sales data can help you spot specific investment opportunities, without having to wait for a company's quarterly or annual report.
Balance was achieved through much of the nineties. For this reason alone, investors in the stock and bond markets enjoyed huge gains during the bull market of the 1990s. Retail sales growth did slow down in tandem with the equity market in 2000 and 2001, but then rebounded at a healthy pace between 2003 and 2005. By 2007, the credit crunch was well underway and starting to undermine growth in consumer spending. Later in 2008 and 2009, the rise in unemployment and loss of income during the recession also cut into retail sales. Spending rebounded in 2010 and 2011 but was constrained by lingering high unemployment.
Importance
Retail sales are a major indicator of consumer spending trends because they account for nearly one-half of total consumer spending and approximately one-third of aggregate economic activity. The control group for retail sales (which excludes restaurants, vehicles, gasoline and building materials) is an input into GDP and offers a narrower look at nondiscretionary spending.
Interpretation
Strong retail sales are bearish for the bond market, but favorable for the stock market, particularly retail stocks. Sluggish retail sales could lead to a bond market rally, but will probably be bearish for the stock market.
Retail sales are subject to substantial month-to-month variability. In order to provide a more accurate picture of the consumer spending trend, follow the three-month moving average of the monthly percent changes or the year-over-year percent change. Retail sales are also subject to substantial monthly revisions, which makes it more difficult to discern the underlying trend. This problem underscores the need to monitor the moving average rather than just the latest one month of data.
In an attempt to avoid the more extreme volatility, economists and financial market participants monitor retail sales less autos (actually less auto dealers which include trucks, too.) Motor vehicle sales are excluded not because they are irrelevant, but because they fluctuate more than overall retail sales. In recent years, many analysts consider the core series to be total less autos and less gasoline service station sales. The latter is volatile due to swings in oil and gasoline prices.
Price changes affect the real value of retail sales. Watch for changes in food and energy prices which could affect two large components among nondurable goods stores: food stores and gasoline service stations. Large declines in food or energy prices could lead to declines in store sales which are due to price, not volume. This would mean that real sales were stronger than nominal dollar sales.
Since economic performance depend on real, rather than nominal growth rates, compare the trend growth rate in retail sales to that in the CPI for commodities.
