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On the radar: Hopes for a solid December in retail sales are well-founded

December retail sales could finish out 2019 with a flourish when the report is released at 8:30 ET on Thursday January 16.

The signs are that consumers were active during the holiday shopping period between November 28, 2019 and January 1, 2020. Brick-and-mortar stores had solid gains in year-over-year sales. The usual post-Black Friday drop in sales still left these at a reasonably good pace and there was a resurgence in activity closer to the start of Hanukkah on December 22 and arrival of Christmas on December 25. Sales remained good as consumers shopped during the week between Christmas and New Year’s Day.

It is harder to tell the state of online sales for December. However, the Mastercard SpendingPulse report said holiday sales excluding autos were up 3.4% in 2019 with online sales at a record high and rising 18.8% compared to 2018.  Moreover, this report was released on December 26 and will not include shopping for the remainder of the month. The nonstore retail component increase could be a large one that will help overall sales.

Given the heavy discounting and promotion around the holidays combined with few units sold, motor vehicle sales may be a bit of a drag in December for total sales. The number of units sold fell to 16.7 million (SAAR) in December from 17.1 million in November. If sales of motor vehicles skewed toward more expensive units, this could be less of a negative than anticipated.

The dollar value of sales at gasoline service stations will likely rise due to volume rather than prices at the pump. Prices fell in the first weeks of December and then abruptly turned higher just at month end. It is fairly normal for prices to decline in December relative to November. In 2019 the dip in prices seems less deep than usual, so that may help increase the sales total as well.

Although the dollar value of sales was up only a meager 0.2% in November, I anticipate a mild upward revision as the late timing of the Thanksgiving holiday and Black Friday may have meant that sales in the initial holiday shopping surge were not fully captured. If so, a solid December, an upward revision to November, and the modest 0.4% rise in October suggest that consumer spending will continue as the driver of GDP growth for a third straight quarter.

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