Retail Spending Fell in November on Broad Weakness – Robert Hughes (12/17/2020)

Retail sales and food-services spending posted a second consecutive decline in November, falling 1.1 percent from the prior month following a revised 0.1 percent drop in October. The back-to-back decreases follow five consecutive gains for May through September and two devastating declines in March and April. The recent declines move retail sales back towards the nine-year trend (see first chart). Core retail sales, which exclude motor vehicles and gasoline retailers, posted a 0.8 percent drop for the month, moving it back towards trend as well (see first chart).

From a year ago, total retail sales are up 4.1 percent while core retail sales show a 5.9 percent rise. Both are about in line with the growth rates from just before the outbreak of Covid-19 and implementation of government lockdown policies. The current 12-month rates are still above the five-year annualized rates of 3.7 percent and 3.9 percent, respectively, for the five years from 2015 through 2019.

For a second consecutive month, results across the various categories of retailers were mostly weaker. Ten of the thirteen major categories reported declines in November sales (see second chart). Decliners were led by clothing and accessories stores (-6.8 percent), restaurants (-4.0 percent), electronics and appliance stores (-3.5 percent), and gasoline stations sales ( -2.4 percent). Gainers included a 1.6 percent rise for grocery stores, a 1.1 percent gain for building material, garden eq. and supplies stores, and nonstore retailers, primarily online shopping, with a 0.2 percent gain (see second chart).

The November results leave five of the 13 categories with sales still below their pre-lockdown levels. Restaurants were 19 percent below January followed by gasoline stations and clothing and accessory stores (18 percent below), electronics and appliances (9 percent below), and miscellaneous store retailers (2 percent below).

On the upside, nonstore retail sales are 28.4 percent above January 2020 levels. Nonstore retail sales now account for 16.0 percent of total retail sales, up from 12.9 percent in January 2020 (before the pandemic) and about 8 percent at the beginning of 2012. As a share of core retail sales, nonstore sales account for 21.9 percent, up from 17.9 percent in January and 11.7 percent at the start of 2012. Retail sales fell for a second consecutive month in November as quarantines and lockdowns began to reemerge along with new cases of Covid-19. The economic recovery remains very fragile and highly dependent on the progression of Covid-19 and government policy responses. A full return to pre-pandemic conditions for the overall economy and the labor market is likely many months, and possibly several quarters away.

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