- Retail sales disappointed again, recording a drop of 0.7% on the month versus an anticipated decline of 0.2%. The November reading was revised down to -1.4% from -1.1% month-on-month previously reported. Despite the three-month streak of negative growth, the fourth quarter average rounds up to a modest +0.4%. Year-on-year, retail trade finished 2020 2.9% higher.
- Retail sales in the “control group,” which exclude more volatile gas, autos, building materials and food service categories, fell by 1.9% m/m. Negative growth in the “control” flashes a warning for personal consumption expenditures – the biggest driver of economic growth.
- Surprisingly, non-store retailers posted a steep 5.8% m/m decline and the November reading was revised down to -1.6% from +0.2% m/m previously. Despite this setback, the category gained two percentage points in its share of total sales over the course of last year.
- Among other categories in the red were home furniture & appliances stores (-2.3% m/m), food services & drinking places (-4.5% m/m) as well as food & beverage stores (-1.4% m/m).
- It wasn’t all bad news. Sales at gas stations (+6.6% m/m) and clothing and accessory stores (+2.4% m/m) were up. Autos & parts dealers returned to positive growth of 1.9% after declining by 1.5% in November. Building materials retailers reported a second solid month, growing by 0.9% in December, while sales health & personal care stores and miscellaneous retailers grew by 1.1% and 1.7% respectively.
Key Implications
- The last weeks of 2020 brought a resurgence of coronavirus cases and additional business restrictions, foretelling a soft December shopping period. Rising jobless claims and declining personal income did not help consumers to loosen their purse strings either.
- With an additional income stimulus on its way, the pullback in retail trade should prove short-lived. The new Coronavirus Response and Relief Supplemental Appropriations (CRRSA) Act provides $600 tax credits per adult and qualifying children and extends supplemental unemployment insurance programs to mid-March.
- Moreover, yesterday, president-elect Joe Biden proposed a $1.9 trillion package to support American families and prevent further economic disruption. We will find out more about the details of the relief package and how much of it is able to pass Congress in the coming weeks, but another round of economic impact payments, an increase in child tax credit, funds for rent and child care support and an extended foreclosure and evictions moratorium appears to be on the table. This should provide firm ground to households until the pandemic is finally over.
