Retail sales stumble in December to finish 2018 but see annual gains

2018 retail sales data issued today by the United States Department of Commerce finished the year on a decline in December. These numbers were delayed, due to the 35-day federal government shutdown, which ended on January 25.

December retail sales, at $505.8 billion, were down 1.2% compared to November’s revised $512.2 billion (from $513.5 billion). While December retail sales saw a sequential decline, Commerce reported they were up 2.3% compared to December 2018. Total 2018 retail sales headed up 5% annually, to $6 trillion, according to Commerce, and total retail sales for the fourth quarter increased 3.7% annually.

Excluding gas stations, total 2018 retail sales were up 0.9%, according to Commerce. And in a sign of the ongoing shift to e-commerce, 2018 department store sales were down 0.9% annually, and non-store sales, which are largely comprised of e-commerce, were up 9.6% compared to 2017.

On a separate but related note, the National Retail Federation reported today that holiday retail sales, which it defines as retail sales for November and December, underwhelmed, rising 2.9% annually to $707.5 billion, compared to its forecast made last fall that they would be up 4.3%-to-4.8% to between $717.45 billion-to-$720.89 billion.  

NRF said that November got out of the gate strong for holiday season shopping, with a 5.1% annual increase on an unadjusted basis, but December slipped, up 0.9% annually and down 1.5% on a seasonally-adjusted basis compared to November. And October, while not included as part of the holiday shopping season, was up 5.7% annually, with the cumulative fourth quarter moving average seeing a 0.7% annual gain.

NRF said that this figure includes $146.8 billion in online and other non-store sales, which were up 11.5% annually. This was also short of its forecast of an 11%-to-15% annual increase to $151.6 billion-to-$157 billion.

“Today’s numbers are truly a surprise and in contradiction to the consumer spending trends we were seeing, especially after such strong October and November spending,” NRF Chief Economist Jack Kleinhenz said. “The combination of financial market volatility, the government shutdown and trade tensions created a trifecta of anxiety and uncertainty impacting spending and might also have misaligned the seasonal adjustment factors used in reporting data. This is an incomplete story and we will be in a better position to judge the reliability of the results when the government revises its 2018 data in the coming months.”

As previously reported, NRF’s 2019 retail sales forecast is calling for a 3.8%-4.4% annual increase to more than $3.8 trillion. Online store sales alone, should they rise at the forecasted rate of 10%-to-12%, would come in between $751.1 billion and $764.8 billion.

Factors cited for anticipated 2019 retail sales growth by the NRF included: a still strong state of consumer spending compared to recent years; ongoing strength in the job market; and inflation and interest rates pegged to remain low in 2019, as well as retail sales seeing a benefit from lower gasoline prices.