Retail Sales See Solid Gains in First Half of Holiday Season

November retail sales grew a solid 5 percent year over year and 0.1 percent from an already-strong October as consumers found the deals they were hoping for both online and in stores and showed their purchasing power during the first half of the holiday season, according to calculations released today by the National Retail Federation. Online and other non-store sales grew 15.3 percent year over year, reflecting the growth of online shopping. The numbers exclude automobiles, gasoline stations and restaurants.

“Consumers were able to take advantage of low prices throughout the first half of the holiday season, checking out with full baskets but paying less even though purchasing was up,” NRF Chief Economist Jack Kleinhenz said. “The combination of job and wage gains led to solid holiday spending by American households.”

“Consumers have the wherewithal to spend but households remain measured and rational, which is no surprise given their history since the recovery began in 2009,” Kleinhenz said.

There were broad-based monthly increases across the majority of sectors with the exception of sporting goods.

November’s results indicate that retail sales for the holiday season will meet or exceed NRF’s holiday sales forecast, which anticipates an increase of 3.6 percent over last year’s level for November and December. For a look into the art of forecasting, read Kleinhenz’s article: The Art and Science of Economic Forecasting.

A few specifics from the report include:

  • Online and other non-store sales increased 0.1 percent seasonally adjusted over the previous month and increased 15.3 percent unadjusted year-over-year.
  • Sales at clothing and accessories stores were flat from the previous month and increased 1.9 percent unadjusted year-over-year.
  • Sales at general merchandise stores increased 0.1 percent seasonally adjusted over the previous month and decreased 1.4 percent year-over-year.
  • Electronics and appliances stores’ sales increased 0.1 percent seasonally adjusted over the previous month and decreased 2.5 percent unadjusted year-over-year.
  • Furniture and home furnishings stores’ sales decreased 0.7 percent seasonally adjusted over the previous month and decreased 7.2 percent unadjusted year-over-year.
  • Sales at building materials and supplies stores increased 0.3 percent seasonally adjusted over the previous month and increased 7.5 percent unadjusted year-over-year.
  • Sporting goods stores’ sales decreased 1 percent seasonally adjusted over the previous month and increased 1.6 percent unadjusted year-over-year.
  • Sales at health and personal care stores increased 0.1 percent seasonally adjusted over the previous month and increased 7.7 percent unadjusted year-over-year.

EXPECTATIONS OF STRONGER JOB GROWTH SHOULD LIGHT A FIRE UNDER RETAIL SALES FOR THE REST OF THE YEAR

Many say the only constant in life is change, and nothing could be truer for the retail industry. When it comes to retail sales, which depend on a multitude of factors but mostly the confidence and ability of consumers to spend — both on necessities and discretionary purchases — retailers know change is guaranteed.

Given that we are now at the mid-point of the year, it’s important to reassess where the industry stands as it relates to overall expected sales growth. There are plenty of factors to consider, and given the fluctuations in economic activity through the first half of the year, we believe it is necessary to adjust for the significant variances seen thus far in sales and consumer spending.

NRF in February forecast that retail sales would increase 4.1 percent through the year, including online and other non-store sales. Unfortunately, that outlook has not played out precisely as anticipated. A confluence of events — including treacherous weather through most of the winter, West Coast port disruptions, a stronger U.S. dollar, weak foreign growth and declines in energy sector investments — all significantly impacted retail sales so far this year, and have changed how future sales will shape up for the rest of the year. Additionally, household spending patterns have also recently shifted purchases toward services more than purchases of goods — another contributing factor to lackluster sales results.

As such, NRF is now forecasting that retail sales — excluding automobiles, gasoline stations and restaurants — will increase only 3.5 percent for the year. Online/non-store sales, which are included in the overall figure, are expected to grow between 6 and 8 percent the remainder of the year rather than the 7-10 percent initially forecast for the full year. And we expect gross domestic product to increase between 2.7 and 3 percent during the second half.

While many of the aforementioned factors will not likely be repeated in the coming months, there are some that could linger and somewhat cloud the economic outlook. The impact of the strong U.S. dollar on trade and lower oil prices on energy investments remain as headwinds and could further temper the pace of economic growth.

However, recent economic indicators do suggest that the economy is turning a corner, fortunately putting to rest any concerns that the expansion has stalled. My second-quarter estimates for economic growth are now above 2 percent, which suggests that first-quarter weakness was more of an aberration than a continuing trend. And the job market continues to make strides with nearly 3 million more jobs than a year ago.

We think we’ll see a better second half of 2015. Real consumer demand has actually been stronger than what nominal retail sales have indicated, and deflationary pricing is helping keep receipts low for U.S. households. Going forward, retail sales should register further strength, and resilient consumers should never be counted out.

As for the economy, we believe we’ll see continued growth but recognize that there are critical potential “tipping points,” including foreign markets and wage growth.

MONTHLY ECONOMIC REVIEW: LINGERING WINTER CHILLS ECONOMY, STRONGER SPRING EXPECTED

he pattern of adverse cold weather and snowfall in a large swath of the United States looks very similar to last year. The weather is again at play and could well account for downward revisions to estimates for economic growth.

However, this year’s economic factors are substantially different and provide a stronger foundation for consumer spending in the months ahead. Job growth and openings have risen, energy prices have declined along with inflation, and wages and salaries are stronger. First quarter activity is soft, but the economy remains on firm tracks and is expected to pick up in the coming months.

This month’s full report includes these highlights:

Retail Sales

The outlook remains positive as households are benefiting from low gas prices, job gains and rising home prices.

Consumer Sentiment

Households cited weaker finances compared with last year. Nevertheless looking forward, the tightening of the job market should bring about stronger wage growth in the months ahead.

Consumer Prices

Core inflation is expected to be driven by the push and pull of import prices related to the stronger U.S. dollar along with wage and salary gains as slack in the labor market is reduced.

Gross Domestic Product

It is not clear what has caused the economy to slow but a number of factors could be at play. The composition of GDP, however, with the current revisions indicates a more positive outlook.

Housing

February home sales are the strongest since February 2008 and are well above expectations. The pace of January and February new home sales is in sharp contrast to the tepid sales registered in 2013 and 2014.

Employment

February’s payroll growth remained on solid footing with a gain of 288,000 jobs. Overall employment — public and private sectors combined — increased 295,000 in February.

Retail Jobs and Openings

The churn or turnover in the job market is another good sign of a strengthening job market as workers are becoming confident about job prospects.

Personal Income and Spending

The wage and salary component of income rose 0.6 percent after rising 0.1 percent in December. Wage growth is stronger, registering at nearly a 4.6 percent year-over-year rate for the same month a year earlier.

Chicago Fed National Activity Index

Further reduction in unemployment is needed to push inflation toward the Federal Reserve’s targeted levels.

MONTHLY ECONOMIC REVIEW: DECEMBER 2014

National Retail Federation

In the December 2014 Monthly Economic Review, NRF Chief Economist Jack Kleinhenz provides in-depth analysis on the latest government economic indicators, such as wages and income change, retail sales and consumer sentiment. Additionally, this members-only report features the latest data on the notable growth in Gross Domestic Product: The economy expanded at an annual rate of 5 percent in the third quarter, according to the Bureau of Economic Analysis’ third estimate. This was the first time since 2003 that economic activity exceeded 4 percent in two consecutive quarters.


NRF’s Monthly Economic Review is a report for NRF and its communities’ members that includes the latest information on industry sales, providing a thorough overview of the current retail and economic climate.

Prepared by NRF chief economist Jack Kleinhenz, the report utilizes recent economic data to analyze the impact of key indicators such as energy costs and the housing market on retail sales growth.

MONTHLY ECONOMIC REVIEW: OCTOBER 2014

National Retail Federation

This month NRF Chief Economist Jack Kleinhenz unwraps the basis for the holiday retail sales forecast (NRF anticipates retail sales growth of 4.1 percent) and explains how he uses current economic data and statistics to predict the future and project sales gain during the all-important holiday shopping season.


NRF’s Monthly Economic Review is a report for NRF and its communities’ members that includes the latest information on industry sales, providing a thorough overview of the current retail and economic climate.

Prepared by NRF chief economist Jack Kleinhenz, the report utilizes recent economic data to analyze the impact of key indicators such as energy costs and the housing market on retail sales growth.