Retail sales figures for December showed a decline, surprising some analysts. However, a closer look reveals a more nuanced picture, with competing narratives about the reasons behind the drop. Some attribute it to holiday demand being pulled forward, while others suggest consumer fatigue. Despite the headline figures, year-over-year growth and online spending gains indicate a more positive performance than initially perceived. The report also highlights the importance of seasonal adjustments and inflation considerations when interpreting retail sales data.
Instead, they got a lump of coal., well short of the consensus forecast for a 0.4 percent gain. That was a pretty serious retreat after the solid 0.6 percent increase in November. There are two competing narratives explaining this.
. Optimists say that holiday demand just showed up earlier than expected, and so consumers did not have as much leftover on their shopping lists in December. The pessimists say it looks like consumers just ran out of steam, an impression bolstered by theBut were the numbers really so bad? The headline figures for month-to-month changes in retail sales are seasonally adjusted. In December, thejumped 10.9 percent from November to December, stronger than the 8.8 percent gain in the same period a year earlier. December was up 3.8 percent year over year on an unadjusted basis, with October up 3.5 percent and November up 1.9 percent. Of course, the figures get seasonally adjusted for a reason. Shopping always explodes in December. This yearyear-over-year unadjusted numbers . That shows that retail sales rose 3.7 percent from a year earlier. Excluding gas stations, sales were up 4.2 percent. So, headlines blaring that the holiday season was a disappointment are a bit much. For the full fourth quarter,estimates total retail spending rose just 0.7 percent from a year earlier in December and was up 1.8 percent on a per-household basis. Their channel split also matches what legacy retailers have been living with for years: online spending up 6.7 percent year over year in December, brick-and-mortar down 1.9 percent.The figures are also not adjusted for inflation. But this is harder than it looks. A lot of “real retail sales” commentary starts with the wrong deflator.—clothing, electronics, general merchandise, groceries—while the consumer price index for “all items” is dominated by services inflation, led by shelter and other sticky categories that never pass through the retail register. That might not matter much when both sides of CPI are moving in tandem; but in a period of high services inflation and low goods inflation, it can be misleading.was up 2.7 percent year over year, while CPI for commodities was up 1.7 percent, and goods less food and energy was up just 1.4 percent. Use the services-heavy headline CPI to deflate goods spending, and retail volumes look weaker than they are. Use a core goods price measure, and the same nominal gains translate into modest real growth instead of a contraction. If we go with the 1.7 deflator, real December sales increased two percent from a year ago. That’sThe inflation angle is where the December retail story gets interesting. A flat December month-to-month print has tended to line up with cooling inflation more often than reheating. Looking back at every year since 2000, and focusing on years when December retail sales were flat, nearly flat, or down on a seasonally adjusted basis , headline CPI inflation in the following calendar year ran hotter than the prior year only twice. In years when December retail sales posted more than a rounding-error gain, inflation accelerated nine times. The signal is stronger in goods: goods inflation accelerated only twice after a flat or down December, versus ten times when December retail sales were firmer.Weak year-end demand usually means limited pricing power as the new year begins. January markdowns deepen, inventory plans get trimmed, and retailers compete harder to move goods. That pressure shows up in goods prices first, and it often bleeds into the broader inflation picture as the year unfolds.. The Dallas Fed and other researchers have argued that the economy’s break-even job growth has fallen as population growth slowed—a shift that accelerated over the past year amid tighter immigration enforcement. The same logic applies to retail sales. With fewer new households being added to the consumer base, aggregate spending can look softer even when spending per household is holding up. That’s worth keeping in mind when analysts treat any single monthly retail print as a referendum on the consumer. Note, however, that is not much comfort for investors. They will not care why sales aren’t growing as much as expected. Lower sales are lower sales. But it does matter if we areTurning Point USA's All-American Halftime Show Wins the Super BowlDeutsch: If You Don't Think Bad Bunny Is Who We Are, You Need Head Examined White House: Trump’s Alleged 2006 Call to Palm Beach Police Chief ‘Cracks’ Establishment’s Epstein Narrative on POTUSDeutsch: If You Don’t Think Bad Bunny Is Who We Are, You Need Your ‘Head Examined’WATCH: Norwegian Biathlete Overcome with Emotion, Admits to Cheating on Girlfriend After Earning Bronze Medal6 Years After Pandemic, China to Monitor Dangerous Bat-Borne Illness in Lunar New Year Travel
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