Released each month by the U.S. Department of Commerce, the Retail Sales Report consists of receipts from stores and merchants that sell durable and non-durable goods and services. The report incorporates all in-store, internet and catalogue sales.
The retail sales data makes up about 40% of total consumer spending. In the U.S., consumer spending accounts for 68% of our nation’s economic growth. Consequently, monthly retail sales provide Wall Street a key insight on the state of the American consumer and our economy.
On Wednesday, the release of the November Retail Sales Report created a worrisome tone on Wall Street. In November, monthly retail sales were reported at $546.5 billion, down 1.1% from October. Moreover, October’s monthly gain of 0.3% was revised lower to reflect a 0.1% decline — the first monthly decline in retail sales since April.
Of the 13 retail sectors tracked by the Department of Commerce, only three posted gains in monthly sales. The top performing sector was Food & Beverage Stores (+1.6%) followed by Building Materials & Garden Equipment & Supplies Dealers (+1.1%) and, lastly, Nonstore Retailers (+0.2%). The largest monthly declines in retail sales were in Clothing & Clothing Accessories Stores (-6.8%) and Food Services & Drinking Places (-4%).
Despite the back-to-back monthly declines in October and November, Wall Street is not yet predicting doom-and-gloom scenarios for America’s retail industry. November’s retail sales of $546.5 billion are still higher than they were before the pandemic hit in March and April. In fact, November’s monthly sales are 3.6% higher than February’s and 4.1% higher than in November 2019.
But the latest retail sales data does call into question the perceived strength of the recent Thanksgiving holiday shopping weekend — headlined by the Black Friday and Cyber Monday shopping extravaganzas. Initial data reported fairly robust sales during this five-day shopping weekend. On Cyber Monday alone, Americans spent a record $10.8 billion, the single largest online shopping day in U.S. history.
The retail sales data is the latest in a string of economic data feeling the sting from the near two-month surge in the number of COVID-19 cases. As expected, as the number of cases nationwide have escalated, so have government restrictions on American businesses. For consumers, it has brought a renewed hesitancy to frequent stores and large crowds, which often go hand-in-hand with holiday shopping.
But Wall Street’s concerns on the sudden decline in retail sales is tempered by the belief that this surge in COVID-19 cases — though significant — is most likely temporary. Unfortunately, for retailers, it is happening during the largest shopping event of the year — the retail holiday shopping season.
Mark Grywacheski is an expert in financial markets and economic analysis and is an investment adviser with Quad-Cities Investment Group, Davenport.
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