· Monthly retail & food service sales released by the Census Bureau yesterday were far worse for December than expected. Sales fell a seasonally adjusted 1.2% in December from November. Every major category tracked was down except motor vehicles and building materials. Excluding automobiles, gasoline, building materials and food services, retail sales dropped 1.7%. Since 1992, month-over-month (MoM) retail sales have averaged 0.35% and saw a low of -3.9% in Nov 2008.
· A further surprise in the report was that December online sales fell 3.9% from November. YoY online sales were up 3.7% from a year earlier.
· While some retailers have reported some softening, the numbers run counter to other indicators. For example, MasterCard SpendingPulse reported strong holiday retail sales numbers – they said sales from Nov 1 to Dec 26 were up 5.1% and that online was up 19%. Also we’ve seen strong job numbers.
· Yesterday the NRF released their holiday sales numbers of up 2.9% YoY below the 5% MasterCard reported (which was also roughly the consensus). The NRF’s chief economist said, “The combination of financial market volatility, the government shutdown and trade tensions created a trifecta of anxiety and uncertainty impacting spending.”
· While the numbers from the Census Bureau are a bit troubling, they are subject to revisions which can sometime be large and the weakness may have been temporary driven by factors like stock market volatility and the initial days of the government shutdown. For instance, Visa reported some softening in US spending in December that recovered in January.
· Retailers start reporting earnings next week. Some have already pre-released with softer than expected results including Macy’s, Kohl’s, JC Penney. However, others like Target and Costco pre-released strong numbers.
· Total retail & food service sales are ~30% of GDP, so we may see a weaker Q4 GDP number.
Sarah Kanwal
Equity Analyst, Director
Direct: 617.226.0022
Fax: 617.523.8118
Crestwood Advisors
One Liberty Square, Suite 500
Boston, MA 02109