The data on December retail sales is relatively old, but still important in assessing economic growth for the fourth quarter 2018. The numbers will feed into expectations for the initial estimate of fourth quarter GDP set for release on Thursday, February 28 at 8:30 ET.
Retail sales fell 1.2% in December, a surprising and disappointing finish to the year. There were small downward revisions to November to up 0.1% (previously +0.2%) and October at up 1.0% (previously +1.1%). Much of the blame for the drop is in gasoline with a decline of 5.1%, but other categories displayed weakness like furniture (-1.3%), department stores (-3.3%), and miscellaneous retailers (-4.1%), and nonstore retailers (-3.9%). The only points of strength were in motor vehicles (+1.0%) and building materials (+0.3%). The “core” retail – sales excluding motor vehicles, gasoline, and building materials – was down 1.6%.
On the upside in the report, year-over-year sales remained strong at up 4.1% overall, up 4.7% excluding motor vehicles, and up 2.3% at the core, albeit showing some loss of momentum.
We won’t know when we will get the January data until the Census Bureau provides a new release date, and they won’t be able to provide that until they know that another partial federal government shutdown has been averted. Congress is up against the February 15 expiration of the short-term continuing resolution. Although it is probable that another damaging shutdown will be averted, it is not certain until President Trump’s signature is actually on the legislation, or if Congress is prepared to overturn a veto. Looking ahead, the January retail sales number will probably not be much better. Although the plunge in gasoline prices should be done, sales of motor vehicles declined in January from December. The weather was wintery and will not encourage more than clearing out of cold-weather merchandise in department stores, and the partial federal government shutdown caused a drop in consumer confidence that didn’t encourage shopping or dining out.
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