skip navigation

By the Numbers

Featuring brief segments of economic analysis from our senior economist Michael Bazdarich, PhD.

The economic analysis we previously featured in By the Numbers is now available on the Western Asset Blog. This page will no longer be updated.

December Retail Sales on a Holiday Roll

After last week’s soggy payroll jobs report, there was a distinctly better tone to retail sales news this morning. True, December headline sales rose only 0.4%, with our control measure (excluding cars, building materials and gasoline) up an equal amount. However, that was on top of a 0.6% upward revision to November sales gains that were already strong even prior to the revisions.

As seen in the accompanying chart, the parlay of November and December gains pulls the six-month annualized growth rate for the control measure up to 7.1%, from 3.7% only two months ago. So, yes, today’s news overall was right in line with the positive retail release of a month ago. Meanwhile, sales grew at virtually all store types, with especially good growth at grocery stores, clothing stores and online merchants.

We have been forecasting only stable consumer spending growth, because household income growth has actually been decelerating for the past two years, and recent interest rate developments have been at best a neutral for consumers. True, stock market gains have driven robust growth in household wealth growth, but our experience has been that this is mostly an “upper strata” indicator and not a reliable driver of consumption trends. Meanwhile, the recent tax bill augurs well for corporate investment, but is of dubious merit for households, and consumer spending on services actually looks to have slowed lately.

So, why the November/December pop in sales? Well, it was the holiday season, after all, and who isn’t up for a Christmas binge? Our guess is that retail sales growth will slow again with the new year when households receive the bills for their holiday spirit. Still, we can enjoy the sales growth while it is here.

Retail Sales Trends
Retail Sales Trends
Source: Census Bureau, as of 31 Dec 17. “Control” retail sales is total sales less vehicle dealers, service stations and building materials stores.

Michael Bazdarich

Product Specialist/Economist

Mike brings more than 43 years of experience to his position. "By the Numbers" will address economic data releases that are pertinent to a broad range of investors.

Prior to joining the Firm in 2005, Mike ran his own consulting firm, MB Economics. He earned his PhD in Economics at the University of Chicago.

Sign up to receive email updates as new reports are released.

© Western Asset Management Company, LLC 2020. This publication is the property of Western Asset and is intended for the sole use of its clients, consultants, and other intended recipients. It should not be forwarded to any other person. Contents herein should be treated as confidential and proprietary information. This material may not be reproduced or used in any form or medium without express written permission.
Past results are not indicative of future investment results. This publication is for informational purposes only and reflects the current opinions of Western Asset. Information contained herein is believed to be accurate, but cannot be guaranteed. Opinions represented are not intended as an offer or solicitation with respect to the purchase or sale of any security and are subject to change without notice. Statements in this material should not be considered investment advice. Employees and/or clients of Western Asset may have a position in the securities mentioned. This publication has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information, you should consider its appropriateness having regard to your objectives, financial situation or needs. It is your responsibility to be aware of and observe the applicable laws and regulations of your country of residence.
Western Asset Management Company Distribuidora de Títulos e Valores Mobiliários Limitada is authorised and regulated by Comissão de Valores Mobiliários and Banco Central do Brasil. Western Asset Management Company Pty Ltd ABN 41 117 767 923 is the holder of the Australian Financial Services Licence 303160. Western Asset Management Company Pte. Ltd. Co. Reg. No. 200007692R is a holder of a Capital Markets Services Licence for fund management and regulated by the Monetary Authority of Singapore. Western Asset Management Company Ltd is a registered Financial Instruments Business Operator and regulated by the Financial Services Agency of Japan. Western Asset Management Company Limited is authorised and regulated by the Financial Conduct Authority (“FCA”). This communication is intended for distribution to Professional Clients only if deemed to be a financial promotion in the UK and EEA countries as defined by the FCA or MiFID II rules.