Retail sales, one of the few top-tier economic indicators to stage a quick “V-shaped” recovery in the US, fell in November.
The 1.1% drop was far larger than the 0.3% decline economists expected.
Adding insult to injury, October’s 0.3% gain (already disappointing), was revised to show a 0.1% decline.
That is not good news. The ex-autos print for November was -0.9%. That looked like an egregious miss. Consensus expected a 0.1% gain. The control group showed a 0.5% drop. The market wanted a 0.2% rise.
For months, analysts and economists have warned that spending can’t possibly hold up in the face of elevated unemployment and reduced federal assistance. Transfer payments and other aid were credited with bolstering the recovery in consumption that helped fuel the Q3 rebound in the world’s largest economy.
Ambiguity around the extension of key programs, including and especially a federal supplement for unemployment benefits, prompted many to fret that Americans would be more reluctant to open their wallets going forward, especially as COVID-19 cases surged, prompting new lockdowns and contributing to a deceleration in labor market momentum. That retrenchment is now a reality.
It may look like just a blip on the proverbial radar screen (figure above), but do note that outside of the pandemic context, a 1.1% decline in retail sales would be considered fairly large. With October’s revision, retail sales have fallen in both months of Q4.
On the face of it, this doesn’t bode particularly well for the holiday shopping season, and you’ll note that it helps validate declines seen in personal consumption and incomes.
The November retail sales figures come on the heels of a disappointing November payrolls report and last week’s surge in jobless claims. On Wednesday morning, Congress was closing in on a virus relief bill “just” five months after provisions from the last package began to expire.
Finally, recall that revolving credit contracted for a seventh month in eight in October. The $5.47 billion drop took total revolving credit outstanding to a three-year low. That too was suggestive of consumer retrenchment.
A month ago, when retail sales data for October disappointed expectations, I gingerly noted that “it’s probably a bit hyperbolic to call this a coal mine canary, but there it is – I just did.”
The patient is severely ill and with no other options you administer adrenaline. Viola, said patient appears recovered – until the medicine wears off.
Part of the decline may be the result of low expectations from producers and retailers who under produced some goods. Can’t sell what was never there. The first ten items I tried to buy from LL Bean’s catalog were marked as unavailable until after the first of year. Other places I visited prepared to buy did not have the items I wanted. Supply chain issues, bad decisions, caution, delivery caps … many reasons may be possible here.
Just heard on the tube that lawmakers are proposing a last minute effort to include a $600 check to all Americans in the relief bill, I’m sure is unrelated to the retail numbers… if people are locked down or worst (sick and dying), can it really be Christmas if no one buys crap?