December’s retail sales dropped off steeply in November and marked the sharpest monthly plunge in nine years, with almost every category showing a decrease in sales from the previous month.
Data showed that overall retail sales fell 1.2 percent from November’s numbers – a figure well off analysts’ forecasts. Experts had predicted on average a modest gain of between 0.1 and 0.2 percent. The large drop has led to increased concern of a recession and has economists highly anticipating the release of the next report.
“I wouldn’t want to start banging the drum, saying ‘Things are terrible. We really have to start battening down the hatches,’” said Jay H. Bryson, managing director of Wells Fargo Securities.
“I really want to see what happens in January.”
In the category of nonstore retail, which includes Amazon and other online businesses, sales fell 3.9 percent from November – the worst monthly percentage drop in over 10 years. The category frequently records month-over-month growth.
Department stores continued to struggle, as they compete with online sites for customers.
“Department-stores sales were down 3.3 percent in December. That makes sense, given the struggles that some of the traditional sales folks have had,” said Bryson.
The dollar amount of gasoline sales fell 5.1 percent, which was not unexpected due to low oil prices. The cost of oil was at its lowest for the year in December, resulting in more affordable gasoline.
Automotive merchandise and building supplies were the only categories that saw positive gains in the December data. Sales of cars and auto parts rose 1 percent, while building materials and supplies saw a 0.3-percent gain for the month.
Despite the surprisingly weak month-over-month numbers, overall retail sales for the previous 12 months were still up 2.3 percent. Since December 2017, all categories surveyed for the retail-sales reports saw growth, with the exception of furniture and specialty-item retail (books, sporting goods). Sellers of these items also face stiff competition from online sellers.
The 1.2-percent December drop surprised many economists. November’s retail sales report was strong and appeared to signal high consumer confidence to kick off the holiday-shopping season.
Economists could not point to any obvious factors for the December downturn. No prolonged extreme weather event occurred. The government shutdown lasted only a little more than one week at the end of December – when retail sales are traditionally slow.
Data from analysts’ own research often ran contrary to what was in the December retail-sales report. Some experts treated the figures with a grain of salt – if not outright skepticism.
“We have every other data point from the national retail guys – the National Retail Federation to Mastercard – saying ‘No, no, no. Spending was great. It was better than we expected,’ said Andrew Zatlin, founder of SouthBay Research.
The January retail-sales report is expected to be released in late February. Only at that point will economists be able to determine if December was just an outlier or a warning of difficulties ahead.
“I want to look at this in context. The November numbers are really, really strong. Do we get some sort of bounce back in January?” Bryson said.