Retail Sales Fall in December, But Economists Remain Optimistic

Holiday shoppers 2014
Holiday shoppers inside Macy's in New York
Photo by Getty Images

Retail sales hit a rough patch in December, falling 0.9 percent, the largest drop since January 2014.

Despite the contraction in sales at clothing, department and big-box stores — and all other categories in December — economists viewed an adjusted 0.4 increase in November sales as a positive and feel the slowdown in spending is temporary, thanks to falling gas prices and a better job market.

Though retail sales fell across the board, from autos to clothing to electronics, when gasoline and autos are removed, core retail sales fell only 0.3 percent during December.

The National Retail Federation’s chief economist, Jack Kleinhenz, said that despite the sluggish December numbers, holiday sales were the best in years. The Federation reported that holiday sales increased 4 percent, to $616.1 billion, just under the 4.1 percent increase that had been forecast.

“While December’s figures are disappointing, holiday sales in 2014 were the best we’ve seen since 2011. We remain positive about the future and expect to see consumers continue to benefit from the extra income gained from an improved job market and the dramatic fall in gas prices. It is important to recognize that December is a very difficult month to adjust for seasonal forces because of holiday spending, and this could explain in part this month’s volatility,” said Kleinhenz in a release.

While much of the holiday selling season is starting earlier and earlier (possibly accounting for the slowdown at the end of December), overall retail sales also signal concerns for footwear regarding how and where consumers are choosing to spend their savings. As shoppers spend more on big-ticket items and use their discretionary income for food, apparel and footwear will have to be creative to capture consumer dollars.

Mesirow Financial’s chief economist, Diane Swonk, said that even though December sales were disappointing, there were bright spots.

“Core retail sales, which strip out the shifts in vehicles and gasoline-station sales, were not as bad. We also saw a redistribution of spending during the month. Discretionary spending on everything from restaurants and drinking places to big-ticket furniture and appliances surged during the month,” wrote Swonk in her economics blog. “Even after all the ‘bad’ news on the holiday season is taken into account, retail sales actually appear to have come in close to what we expected for the months of November and December, after adjusting for a sharp deceleration in inflation.”

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