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November retail sales not full of holiday cheer

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The traditional holiday sales did not get off a robust start in November, which was most likely because of a late Thanksgiving holiday that pushed some spending into December. After peaking in mid-2019, overall retail sales will need to pick up in December to support growth anywhere near 2% in the current quarter.

Given the noise around the data series — Cyber Monday, for example, fell in Decemer this year — we expect a modest rebound to spending in December that will be in line with the stronger underlying trend in the data over the past six months. For this reason, we will wait until we get that data to come to any conclusions about the condition of the consumer heading into 2020.

For the third straight month, retail sales arrived well below expectations with the top line advancing by 0.2% month over month, while the all-important control group used to estimate consumption inside the GDP rising by 0.1% in November. Outlays excluding autos and gasoline, or core retail sales, were flat on the month.

Over the past three months, overall retail sales have slowed to the point where one needs to differentiate between noise and signal. In our estimation, there is simply too much noise around the time series to come to any major conclusions about the condition of the consumer or the health of the economy. Our preferred look at this time series is the three-month average annualized pace of sales. This implies that top line retail sales have slowed to a 2.3% pace, with the control group that feeds into the calculation of GDP easing to 1.3%. Outlays excluding autos and gasoline sales increased at a 1.5% pace, while ex-good service increased by 2.1% and ex-building materials and auto dealers advanced by 2%.

Spending by category was quite volatile. Outlays on health and personal items declined by 1.1%, clothing by -0.6%, eating and drinking establishments by 0.3%, while miscellaneous spending declined by 0.4%. Spending on motor vehicles and parts increased by 0.5%, electronics by 0.7%, food and beverages by 0.3% and the proxy for e-commerce advanced by 0.8%.

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About Joseph Brusuelas

@JoeBrusuelas

Joe Brusuelas, “chief economist to the middle market,” is the preeminent voice championing issues and policies facing midsize companies in the United States and around the world. An award-winning economist, Brusuelas has more than 20 years’ experience analyzing U.S. monetary policy, labor markets, fiscal policy, international finance, economic indicators and the condition of the U.S. consumer.

A member of the Wall Street Journal’s forecasting panel and the UCLA Anderson School of Management's Board of Directors, Brusuelas regularly briefs members of Congress and other senior officials regarding the impacts of federal policy on the middle market and the factors by which middle market executives make business decisions. He also frequently offers his insights on the U.S., Canadian and global economies in the financial media. In 2020, he was named one of the 100 most influential economists by Richtopia. In December 2023, Brusuelas and the economics team were recognized on Bloomberg's list of Best Bond Forecasters after correctly predicting where the benchmark Treasury would end the year.

Before joining RSM in 2014, Brusuelas spent four years as a senior economist at Bloomberg L.P. and the Bloomberg Briefs newsletter group, where he co-founded the award-winning Bloomberg Economic Brief. Earlier in his career, he was a director at Moody's Analytics covering the U.S. and global economies for the Dismal Scientist website. He also served as chief economist at Merk Investments L.L.C. and chief U.S. economist at IDEAglobal.

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