Tis The Season: Holiday Retail Spending

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Tis The Season: Holiday Retail Spending

As we head into Holiday 2019, “tis the season” to wonder about both the US consumer and the state of US retail sales. Retailers are keenly aware that Thanksgiving falls late this year, making for the lowest possible number of days from Black Friday to Christmas Eve. That’s why you already see store decorations and Holiday promotions/sales.

Looking at the US Census Bureau Advanced Retail Sales (ex food services) data, here are 2 points to consider on the topic:

#1: Holiday shopping has become less important to US retail sales over the years.

Here’s what we see in this chart:

  • Yes, November/December are more important to retail sales ex-food than the average month. If sales were evenly distributed through the year, you’d expect to see these 2 months represent 16.7% of total annual sales. Instead, the Nov/Dec total to an average of 18.5% of retail sales for the year from 1992 – 2018.
  • But the percent of annual sales that fall in November/December has been falling since the early 1990s. From 1992 – 1996, for example, the average was 19.1%. This fell to 18.6% from 1997 – 2001 and has been an average of 18.4% (ex 2008) since.
  • Not in the chart but worth noting: specific retail formats like department stores do have outsized Holiday exposure. Over the last few years 24% of their annual sales fall in November/December. Jewelry stores are even higher, at 27% – 28%.

#2: The long run retail sales data (year over year percent change) reflects a variety of economic and demographic trends:

Here’s what we see in this chart:

  • While US retail sales are rarely negative outside of recession, they have been slowing through the decades.
  • During the middle of the 1990s cycle (1994 – 1998) monthly retail sales averaged 5.9%.
  • From 2003 – 2006, the average was 5.5%.
  • Over the last 5 years the average has been just 3.5%.
  • The reasons for this decline are largely structural, everything from an aging US population to the slow growth of real wages.

#3: As for 2019, retail sales data looks good (but not great):

  • The average monthly increase this year is 3.2%.
  • While slower than 2018’s monthly average of 4.6%, 2019 is close to the 5-year average noted above.
  • The average of the last 3 months is better, up 3.8%.

Summing up: US consumer spending heads into Holiday 2019 in reasonably good shape. That’s good news for the macro economy; business investment has suffered this year due to trade war concerns. Everything from low gasoline prices to stock market strength and solid labor markets should support good November/December retail sales. They may not be what they were in prior cycles, but given the current slow-growth environment they should be good enough to meet or even exceed expectations.