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Home > Economics > Retail sales close out year on a positive note

Retail sales close out year on a positive note

Jan. 16, 2020 by Joseph Brusuelas

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The health of the American consumer remains strong as outlays on retail sales closed out the year on a positive note with plenty of room for upward revisions.

U.S. December advance retail sales increased 0.3% on a month-over-month basis and was up 6% on a year-ago basis. The control group that is used to estimate household spending inside the GDP increased 0.5% month over month and 6.9% year over year.

But we want to caution against reading too much into those numbers. They were bolstered by comparisons to the collapse in holiday sales a year ago caused by volatility across asset markets.

That makes it harder to get a true reading on the advance retail data, which is why we prefer to use the three-month average annualized pace of retail sales to better understand household spending. That number shows that top-line retail sales advanced 2.2%, which is up modestly from the 2.1% in December, while the control group increased 1.2% on a three-month average annualized pace, which is unchanged from November. Based on this data, we are not changing our fourth-quarter GDP forecast of 2.1%.

One interesting aspect of the December report was the 0.2% increase in the proxy for e-commerce sales, which increased 0.2% month over month and 24.1% on a year-ago basis. This does not seem to square with explosion in Internet sales over the holiday. We think that there is ample room for upward revision in coming months.

The detail in the report does tend to suggest restrained spending on the month. While building materials increased 1.4% and clothing advanced 1.6%, outlays on retail items were solid elsewhere.

Spending on furniture increased 0.1%; electronics 0.6%; food, beverages and healthcare 0.4%; sporting goods 0.9%; general merchandise 0.6%; and eating and drinking establishments 0.2%. Spending on motor vehicles and parts declined by 1.3%. Outlays at gasoline stations increased 2.8% because of rising gasoline prices. Also important to note was that retail sales are not adjusted for inflation, so that increase in gasoline sales will depress overall spending through the inflation channel.

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Filed Under: Economics Tagged With: Joseph Brusuelas, retail sales

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, 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.

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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