November retail sales data from Commerce and NRF take steps in the right direction
Retail sales in November, which are typically viewed as the beginning of the holiday shopping season, showed a solid performance with annual and sequential gains, according to data released today by the United States Department of Commerce and the National Retail Federation (NRF).
Commerce reported that November retail sales at $412.4 billion were up 0.3 percent compared to October and up 3.7 percent compared to November 2011. Total sales for the September through November period were up 4.3 percent annually.
NRF reported that November retail sales, which exclude autos, gas stations, and restaurants, were up 0.8 percent on a seasonally-adjusted basis from October and up 4.4 percent on an unadjusted basis annually.
“Stable employment rates, lower gasoline prices and a recovering housing market have all contributed to a holiday shopping season that is on target to meet our original expectations,” NRF Chief Economist Jack Kleinhenz said in a statement. “American consumers are expected to spend cautiously as they monitor the situation in Washington and wrap up their holiday shopping lists.”
The impact of Hurricane Sandy also made a difference in November retail sales, too, said the NRF, with retailers reporting losses after forced store closures related to Sandy. Conversely, it explained that home and building supply stores saw sales rise due to rebuilding and recovery efforts, as evidenced by a 1.6 percent monthly increase for those specific sectors, according to NRF data.
NRF President and CEO Matthew Shay noted that a strong Thanksgiving weekend for retailers and the diminishing impacts of Sandy helped to put retail sales back on track after a somewhat sluggish October. He added that while ongoing fiscal cliff negotiations could crimp consumer confidence and spending this month, the NRF is optimistic that it will see strong holiday sales growth, which it classifies as the months of November and December.
The fiscal cliff notwithstanding there are some signs of economic strength of late, including a decreasing unemployment rate down to 7.7 percent, improving consumer confidence data, as well as encouraging automotive sales and housing data.
But at the same time these things need to be viewed with a certain degree of caution, too, in the light of overall weak GDP growth and declining manufacturing output in four of the last six months.
As many economists continue to point out, higher job growth levels have the potential to boost retail sales—and overall—economic growth. But even with employment data showing some gains, it is still not yet occurring at a rate that has a meaningful impact on retail sales growth.
As previously reported, retail sales largely show slow and incremental growth, while continued growth is needed over a longer period, as consumer spending accounts for roughly 70 percent of U.S. economic activity. And while retail growth is relatively slow still, signals remain intact that the economy is showing some signs of recovery, with consumer confidence on the upswing to a large degree declines in gasoline prices over the last two months.
The continuing trend of slight or flattish sequential retail sales increases remains largely intact due to fairly even retail spending at a time when retailers remain cautious on the inventory planning side and postponing commitments until the until the economic outlook becomes clearer, while they are risking stock outages by having very lean inventories.
“The main thing to take away from this current batch of numbers is that the consumer is not dead,” said Eric Starks, president of freight transportation consultancy FTR Associates. “Things are going to continue to be choppy, and the concern was that consumers would pull away and not buy, which would not be a good thing. It suggests that we are treading water and while things are not better they are not great. It can make it tough to get a real clear direction on where things are going and to get a good read on where the true underlying demand is. But overall this data is not bad.”
Starks noted that the impact of Hurricane Sandy could remain intact for a while, too, for the next three-to-six months or so, with ongoing sales momentum for building supplies and related goods. The bigger issue, he said is whether or not consumers will continue to shop at malls and department stores.