- The December decline was the first in five months and was weaker than market expectations for a flat reading.
- Lower nominal sales were despite a large increase in gasoline prices. Volume sales declined a larger 1.0% in December to partly retrace gains over the prior five months.
Sales at automobile dealers declined 2.5% in December, largely in line with an earlier-reported drop in unit vehicle sales in the month following an outsized sales pace in November (sales of motor vehicle and parts were still up 3.9% from a year ago in December). Less-expected was the extent of broadly-based weakness elsewhere. Sales at gasoline stations were the main exception; however, the 6.6% rise in spending at the pump looks to have been largely attributable to an increase in prices. Excluding the motor vehicle and gasoline station components, sales declined 1.4%, marking the third decline for that component in the last four months.
Our Take:
The pull-back in retail sales volumes in December was broadly expected given an earlier-reported drop in unit vehicle sales from record high levels in November and only partially retraced the cumulative 2.3% gain over the prior five months. Sale volumes still rose an annualized 4.5% in Q4 as a whole (and were up 3.0% on a year-over-year basis in December) which is broadly consistent with our call that overall consumer spending (including services spending not captured in the retail report) rose at a 2 1/2% rate in the quarter. In terms of overall GDP implications, the monthly pull-back in December retail volumes follows earlier reported gains in wholesale (+0.9%) and manufacturing (+2.3%) sale volumes in the month. Along with increasing indications that activity in the oil & gas sector is bottoming out (oil & gas drilling rig counts were above year-ago levels in December for the first time since December 2014), data to-date remain in line with our monitoring for a 0.2% gain in GDP in December that would build on the 0.4% rise in November and further recover from the disappointing, and surprising, 0.2% pullback in October. That remains consistent with our call for a 1.8% GDP gain in Q4 as a whole.
