Humbug holidays: US retail sales drop 1.2% in December
Washington – U.S. retail sales fell in December, posting the biggest drop since September 2009 and delivering more evidence that last year’s holiday sales fizzled unexpectedly. Even e-commerce suffered a big setback.
The Commerce Department said Thursday that December retail sales fell 1.2 percent from November. They were up 2.3 percent from December 2017. Total retail sales for 2018 rose 5 percent from the previous year.
Excluding gasoline station sales, which swing widely as pump prices rise and fall, retail sales dropped 0.9 percent in December. Non-store retailers, which include mail-order and e-commerce vendors, saw sales tumble 3.9 percent. That’s the most since November 2008 in the midst of the Great Recession.
The discouraging December report raises concern about whether the retail sales slowdown was just a blip or points to a more sustainable weakness in consumer spending. But many analysts, as well as an industry group, questioned the reliability of the data. The National Retail Federation said the government shutdown and the resulting delay in collecting the data made the results less accurate.
The stock market recorded big drops in December. And a partial shutdown of the federal government began Dec. 22 at the end of the holiday shopping season.
“We caution against excessive pessimism,” the economists at Oxford Economics wrote in a report about the government’s report.
Jack Kleinhenz, chief economist at the National Retail Federation, said that the government’s sales figures tell an “incomplete story” and that the group will be in a better position to judge the reliability of the results when officials revise its 2018 data in coming months.
A spokesman for the Commerce Department, however, defended the reliability of the data, referring to a statement in the report that “processing and data quality were monitored throughout and response rates were at or above normal levels for this release.”
Separately Thursday, the NRF said that holiday sales in the combined November and December period increased a lower-than-expected 2.9 percent as worries about the trade war with China, the government shutdown and stock market turmoil dampened shopper spending in December.
The result was far below the group’s forecast of 4.3 to 4.8 percent growth in holiday season sales. It marked the slowest pace since 2012 when the figure rose 2.6 percent. The figures include online sale but exclude business from automobile dealers, gas stations and restaurants.
Neil Saunders, managing director of research firm GlobalData Retail, said he expects retail sales to slow in 2019 but doesn’t expect it to be disastrous. He notes that shoppers are benefiting from a strong job market and rising wages, though there are also plenty of headwinds like rising interest rates and overall uncertainty. The benefits of tax cuts have also faded.
“The consumer could go either way,” he said.
The NRF said earlier this month that annual retail sales should grow between 3.8 and 4.4 percent, to more than $3.8 trillion this year as employers continue to hire and the economy hums along.
But it did acknowledge that the ongoing trade war with China and volatile global markets are a threat to the growth.
Storied chains like Sears Holdings Corp. are shrinking. But others – including Walmart and Target – are ringing up strong sales as they adjust to shifting consumer trends and take advantage of a solid economy. A full picture of the holiday season will be revealed when major retailers report final fiscal fourth-quarter results starting next week.
But bankruptcies and store closures will continue through 2019 so there’s “no light at the end of the tunnel,” according to a report by Coresight Research.
So far this year, there have been 2,187 U.S. store closing announcements, with Gymboree and Ascena Retail, the parent of Lane Bryant and other brands, accounting for more than half the total, according to the research firm. This year’s total is up 23 percent from the 1,776 announcements a year ago. Year-to-date, retailers have announced 1,411 store openings, offsetting 65 percent of store closures, it said.