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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.

Consumer Shutdown in December or Just a Glitch in the Data?

This being Valentine’s Day, young folks may be thinking about love, but old folks like me are still thinking about the Christmas season past. Thus, this morning, the U.S. Census Bureau released data on December retail sales, the release occurring one month later than usual thanks to the government shutdown.

When last we heard from Census regarding retail sales, the November report showed strong gains of 0.6% in both November and October. Today’s report showed no such love. Not only were December sales weak, but the strength in both October and November was also revised away.

Headline sales were reported as declining -1.2% in December, on top of a cumulative -0.3% revision to November’s level. We track a "control" sales measure that excludes sales at car dealers, building material stores, and gas stations, in order to focus on consumer-centric retailers. This measure declined by -1.6% in December, with a -0.3% revision to November’s level.

Restaurant sales had surged in mid-2018, only to fall back over the last four months, offsetting earlier gains. These declines exacerbated the softness in our control measure. Still, even without the restaurant sector, sales were soft.

For example, nonstore retailers, which includes online shopping, saw a staggering -3.9% decline in December, on top of a -0.7% revision to November’s level. Interestingly enough, nonstore retailer sales also dropped -2.4% in January 2018, coming off strong December 2017 gains, and even with today’s revisions, nonstore retailers still show an especially strong 2.8% sales gain in November 2018.

Perhaps consumers got off to a very early start to the Christmas season on Black Friday and before, and there was nothing left "in the tank" come December. Or, it might be that the shutdown affected Census’s data collection, so that there are glitches in the data underlying today’s report. This last explanation is not likely, but it is not impossible.

Two months ago, we were downplaying the strong November sales report, pointing to holiday-induced distortions and arguing that underlying consumer trends were steadier. We would take the same approach to today’s especially bad December retail report. Still, the occasional "duds" in the data—such as today’s release—underscore the prudence of the more cautious policy stance delineated by the Federal Reserve in its recent communications.

Retail Sales Trends
Retail Sales Trends
Source: Census Bureau, as of 31 Dec 18. "Control" retail sales is total sales less vehicle dealers, service stations and building materials stores.

Michael Bazdarich

Product Specialist/Economist

Mike brings more than 45 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.

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