February retail sales see mild gains

Mild retail sales increases were posted in February, according to data issued today by the United States Department of Commerce and the National Retail Federation (NRF).

Commerce reported that February retail sales were up 0.6 percent compared to January and were up 5.7 percent annually at $474.0 billion. And it added that total sales from December 2016 through February were up 5.4 percent compared to the same period a year ago. The sequential increase topped the 0.2 percent sequential gain from December to January, while January’s annual gain of 5.6 percent was in line with February’s 5.7 percent annual gain.  

The NRF reported that February retail sales, excluding automobiles, gas stations, and restaurants, saw a 0.2 percent seasonally-adjusted increase compared to January and were up 0.8 percent on an unadjusted basis annually. February online and other non-store sales were up 1.2 percent compared to January and rose 8.2 percent unadjusted year-over-year.

“Sales growth held up well, given warmer than normal weather and tax refund delays,” NRF Chief Economist Jack Kleinhenz said in an NRF blog posting. “While consumers benefit by purchasing more for less, the top-line retail numbers reflect a lack of pricing power and, in many cases, hide underlying consumer demand. While consumer spending in the first quarter has been erratic and most often weak, it registers positive improvement as the year continues.”

This data follows recently announced 2017 retail sales projections from the NRF, calling for an annual gain in the 3.7-to-4.2 percent range, with online and other non-store/online sales (which NRF includes in its over all number) to head up between 8 and 12 percent.

While not a direct comparison, NRF’s 2017 projection would top the 3.3 percent annual gain in retail sales from 2015 to 2016, based on data issued by the United States Department of Commerce.

As previously reported, the NRF offered up various data points supporting its thesis for retail sales growth in 2017, including:

• the economy is expected to gain an average of approximately 160,000 jobs a month, which it said is down slightly from 2016 but consistent with labor market growth;
• unemployment is expected to drop to 4.6 percent by the end of the year; and
• economic growth is likely to be in the range of 1.9 to 2.4 percent

And it offered up a caveat in that the “forecast is a baseline and does not take into account new fiscal measures pending in Washington.”

That is important to consider when considering, as NRF President Matthew Shay pointed out, that 2016 finished with strong momentum as jobs and income saw growth, coupled with debt staying on the lower side. But the optimism is quelled to a degree, he noted, in that while consumers appear to have the resources to spend more than in the past, there is likely to be some hesitancy until there is more clarity in regards to policy changes regarding taxes, trade, and other issues.

With consumer spending accounting for around two-thirds of all economic activity, that commensurate growth, or projected growth, is contingent on consumers being able to change behavior, or, in other words, consistently spend more.   

Chris G. Christopher, Jr., Director, Consumer Economics, IHS Markit, wrote in a research note that Commerce’s reported 0.1 percent sequential increase for February retail sales marks its slowest pace since August 2016.

“The third time was not the charm as February broke the winning streak for retail sales growth,” he wrote. “Growth of retail sales used to estimate consumer spending was the slowest since July 2016. These results came on the heels of a very strong December and a January tally that was revised upward 0.2 percentage points from the first estimate to a strong 0.6% growth rate. Consumer spending will remain an engine of US economic growth, supported by rising employment, disposable incomes, and household wealth. Income tax cuts in 2018 will likely fuel an acceleration in spending growth and a hike in the personal saving rate.”