November “Control” Retail Sales Show Good Growth

Retail sales showed good growth in November, once you get past the headline number. Thus, while total sales rose only 0.2% in November, “control” sales were up a robust 0.6%. Of course, the favorable November results followed soggy tallies in September and October, when control sales rose only 0.1% and 0.2%, respectively.

Once again, we focus on control sales partly because the sectors abstracted from are more volatile month-to-month and partly because those sectors are as much affected by business demand as by consumer demand, so control sales provide the better measure of consumer demand per se.

The accompanying chart tells the story, showing sales moving above trend this spring, falling back toward trend over August to October, and then bouncing back above trend in November. For the record, total retail sales have gone flat recently, but this is due to plunging gas prices.

How did underlying retail sales grow nicely in November when holiday spending reports from major retailers were so glum? There are a few possible explanations. Most importantly, warm fall weather in the northeast probably brought out shoppers prior to the Black Friday kickoff, thus propelling sales in November. The late Thanksgiving likely helped in this regard. Second, retailers report on year-over-year basis, whereas the retail sales number we cite are 1-month changes. Finally, it could also be that the glum anecdotal news from some retailers drowned out more favorable reports from others.

In any case, consumer demand has been a relatively strong portion of the economy all year, and the November data suggest this will continue. Soft growth overall has been driven by problems in capital spending and exports, and these sectors are not touched on by the retail data. So, enjoy the better retail data, but stay aware of less favorable news elsewhere.