Retail industry ends 2019 with final surge
Released each month by the U.S. Department of Commerce, the Retail Sales report tracks the receipts from stores and merchants for all in-store, internet and catalogue sales across 13 retail industry sectors. Its importance to the financial markets is that retail sales make up a large part of consumer spending – which accounts for more than two-thirds of all U.S. economic growth.
The December Retail Sales report placed a final cap on a mostly positive year for America’s retailers. Retail sales increased by 0.3% over November and by a massive 5.8% from December 2018 – the largest annual gain since August 2018. Total sales for the 12 months of 2019 rose 3.6% from 2018.
In December, 12 of the 13 retail sectors reported an increase in monthly sales. The top performing sector was Gasoline Stations, which reported a 2.8% monthly gain. Rounding out the Top 5 were No. 2 Clothing & Clothing Accessories Stores (+1.6%) followed by Building Materials, Garden Equipment and Supplies Dealers (+1.4%) and Sporting Goods, Hobby, Musical Instruments & Book Stores (+0.9%). The No. 5 spot was shared by Electronics & Appliances Stores and General Merchandise Stores, each posting a 0.6% gain. The lone declining sector was Motor Vehicles & Parts Stores, which posted a monthly loss of 1.3%.
December’s report serves in stark contrast to the retail industry’s dismal start to 2019. From November 2018 through February 2019, American consumers pulled back on spending, sending retail sales growth to its lowest levels since 2016. This sudden decline triggered much apprehension on the state of the U.S. economy. Both Wall Street and America’s retailers began to wonder – were rising interest rates, escalating trade disputes and economic uncertainty finally taking its toll on the American consumer?
Fortunately, this four-month pullback in retail sales was short-lived. In March, retail sales quickly rebounded and posted stellar gains in nine of the next 10 months.
The December report also provides an affirmation to the recent November-December retail holiday shopping season. First, some history. In the retail holiday shopping season of 2018, there was an initial surge in retail sales during the Black Friday and Cyber Monday shopping days. Unfortunately, retail sales quickly tapered off in December. This conveyed to the financial markets that yes, consumers were willing to spend their money, but only on heavily discounted goods and services. And for retailers, there’s not a lot of profit to be made when the bulk of your sales comes from these heavily discounted shopping days. But the latest December Retail Sales report conveys that this year, that strength in consumer spending did carry into December and the rest of the holiday shopping season.
As the economy begins a new year, retailers will be looking to build off this steady pattern of sales growth. Unemployment is at a 50-year low, job hiring is robust and wage growth is strong. Perhaps most important, consumer confidence remains high. Hopefully, in 2020, that optimism will continue to be converted to sales at America’s retail check-out counters.
Mark M. Grywacheski, Investment Advisor
Opinions expressed herein are subject to change without notice. Any prices or quotations contained herein are indicative only and do not constitute an offer to buy or sell any securities at any given price. Information has been obtained from sources considered reliable, but we do not guarantee that the material presented is accurate or that it provides a complete description of the securities, markets, or developments mentioned.
Quad Cities Investment Group, LLC is a registered investment advisor with the U.S. Securities Exchange Commission.
