- Retail sales tumbled by 1.1% in November, disappointing expectations for a more muted decline of 0.3%. October was also revised down to -0.1% (from 0.3% in advance estimate).
- Most categories reported negative growth in November and downward revisions for October. Among the biggest retreats were clothing stores (-6.8%) and food services & drinking places (-4.0%) – most impacted by more restrictive measures. Autos & parts dealers declined by 0.5%, following a downward revision to zero growth in October (previously +0.3%).
- Three categories were bright spots posting positive growth, (albeit all three were downwardly revised in October): food & beverage stores and building materials retailers increased by 1.6% and 1.1%, respectively, while non-store retailers grew a softer 0.2% m/m. Still, the latter seems destined for success in the times of pandemic: it now makes up 16% of total retail sales, three percentage points higher than last year.
- Excluding more volatile components (gas, autos, building materials and food services), retail sales in the “control group” fell by 0.5%. October’s gain was also revised down to -0.1% (from +0.1% in advanced estimate).
Key Implications
- The report broke the six-month positive growth streak. Historically, November is one of the strongest months for the retail sector driven by holiday spending and deep discounts. Yet again 2020 proves to be the year of breaking traditions – retail sales were down on a non-seasonally adjusted basis in the month for the first time since 2008.
- An elevated unemployment rate combined with lack of substantive progress on income support measures explains the decline in retail salles. Another factor is the “pull-forward” of holiday shopping to earlier weeks this year. However, the downwardly revised October reading suggests that this year’s retail holiday season is even softer than previously anticipated.
- The weak report may put some fire under Congress to put aside political differences and pass a new fiscal package. After all, the decline in retail sales is evidence of consumers’ deteriorating confidence. We remain optimistic that legislators will uplift Christmas spirit by reaching a deal before the recess next week.
