U.S. Retail Report: December holiday sales come in weaker than expected

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Despite predictions for strong holiday sales, today’s December retail sales report from the U.S Census Bureau disappointed. Total retail and food services sales were up just 0.1% from November and 6.5% on a year-over-year basis. According to Action Economics, economists were expecting a month-over-month increase of 0.3%. Excluding auto sales, total sales actually declined 0.2%, compared with expectations for a 0.3% rise. The bright spots in the data were auto dealers (up 1.5%), building equipment and garden supply stores (up 1.6%), and clothing stores (up 0.7%). But the negatives came in categories that typically do well during the holidays: sales at electronics and appliance stores fell 3.9% and sales at non-store (online) retailers fell 0.4%.

Auto sales continue to rebound

Motor vehicle and parts dealers make up the largest subcomponent of overall retail sales, and these retailers had a good month to cap off a good year. Sales were up 1.5% from November to December and 8.8% year-over-year. According to data from the Bureau of Economic Analysis, December light vehicle sales on a SAAR basis came in 13.5 million units, following a 13.6 million figure in November. For all of 2011, sales totaled 12.7 million, up 10.3% from 2010 and the highest annual sales number since 2008. Light vehicle sales still remain well below the average 16-17 million units we saw between 1999 and 2007, and although industry forecasts are bullish for 2012, it could take some time before we get back to the previous highs.

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Mixed results for typical holiday performers

Two retail categories that normally carry retail sales through the holidays are electronics and online sales; however, both were negatives last month. Sales at electronics and appliance stores fell 3.9% in the month and were flat from a year ago. Closely tied to electronics sales, non-store retailers saw a 0.4% monthly decline, although sales were still up 10.6% from December 2010. With Thanksgiving falling early in November this year (the 24th) and Cyber Monday occurring on November 28th, a lot of online holiday shopping for electronics were pulled into the month. This is evidenced by the fact that the November growth numbers for both components showed surges in year-over-year growth. On the other hand, clothing and accessory stores ticked up nicely in December, both on a year-over-year basis (+6.0%) and on a month-over-month basis (+0.7%).

Retail sales still ended 2011 on a strong note, with annual growth coming in at 7.7%, the best annual performance since 1999. Fourth quarter total retail sales were up 1.9% from the third quarter, which bodes well for the consumption component of GDP in the fourth quarter of 2011, which will be announced on January 27.

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