The Home Stretch
This past week a client of mine called me up, concerned over the “weak retail sales report.” He had just read on MarketWatch; “US Retail Sales Soften in November as Consumers Face High Inflation.” He was concerned if projections regarding a strong holiday sales season may have missed the mark. Were they overblown to begin with? Did early spending in October divert much of the sales activity? Was the rise of the Omicron variant spooking consumers? Were shoppers finally retracting in the face of 40-year high levels of inflation?
All are legitimate concerns… and potential trends playing out… there is only one problem here. That is that retail sales did not actually soften in November. According to the U.S. Commerce Department, consumers spent approximately $639,829,000,000 in November. This reflects an increase of $1.64 billion over what was spent in October. That equates to just a 0.3% growth rate month-over-month, which is where the headlines have focused.
While this monthly growth rate of 0.3% was lower than some analysts anticipated (Bloomberg’s polling of economists came up with a consensus forecast of 0.8%), it was hardly the bleak report some headlines would have you believe. The more important metric for gauging longer-term health is annual change. November retail sales were up 18.2% year-over-year. And, if you want to gauge last month’s performance against our last “normal” year before the pandemic? They were up 22.4% over 2019 levels.
I am not saying that monthly changes in the numbers are not important any more than I would say daily changes in the stock market are not important. But, at a certain point, those short-term fluctuations are simply noise compared to the longer-term trends behind them. And, unfortunately, a lot of clickbait is noise.
The weaker than expected monthly growth for November totals reflects early shopping patterns as well as some signs of inflationary pressures starting to impact consumers. But were these numbers weak enough to suspect that holiday sales growth predictions exceeding 8.0% are overblown? I do not think so.
We are now in the final home stretch of the holiday shopping season; nearly 150 million people were planning to shop this past weekend. Foot-traffic tracking firm Placer AI predicted footfall would be up significantly over 2020 levels. Likewise, Sensormatic cited a 48% jump in Black Friday foot traffic as a sign that Super Saturday would be strong as well. Will inflation, Omicron, and earlier holiday spending impact the final results? Yes, but just on the margins. Do not mistake the noise for the story and do not mistake headwinds for hurricanes. Consumers are still spending at a record pace.
Here is wishing you all a happy, healthy, and safe holiday season. We will be back the first week of January.