November Retail Sales Drop, Dampening Holiday Mood

Woman wearing protective face mask and looking at a Christmas market stall - stock photo
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In the month that is typically seen as the start to the holiday shopping season, U.S. retail sales dipped more than expected, a sign of rising COVID-19 cases and a struggling labor market. 

Retail sales slid to $546.5 billion in November, a 1.1% decline from October, but a 4.1% increase from November 2019, according to Wednesday’s advance estimate from the Census Bureau. The decline was larger than the 0.3% drop economists had expected, according to Econoday. The Census Bureau also revised the October sales figure down, saying it fell 0.1%, rather than rising 0.3%.

The latest monthly declines follow five months when sales were growing as COVID-19 cases steadied or declined and businesses slowly reopened. Now, with virus cases surging to new heights and some states increasing restrictions, the recovery in the job market is stalling and people are more wary of spending and being in stores.

“The timing of the latest surge in COVID cases could hardly be worse going into what is typically the height of the holiday shopping season,” economists at Wells Fargo Securities wrote in a research note. 

Retail sales were down in all but three of the 13 major categories. Among the bright spots, food and beverage store sales rose 1.6%. Online and other non-store sales edged up just 0.2%, but were up almost 30% from November 2019. 

The National Retail Federation said the decline from October isn’t surprising, given many people started their holiday shopping earlier than the official Nov. 1 start of the season. For example, Amazon.com’s Prime Day, which was delayed to October from its usual summer date, may have had an impact on results, BMO Economics said in a note. In October, online sales jumped 2.4% month-over-month.

“With mobility slowing, employment softening, and demand hesitant, the holiday season could turn out to be rather miserable,” Gregory Daco, chief U.S. economist at Oxford Economics, wrote in a commentary.

Wells Fargo economists noted that they would not be surprised to see December sales declining modestly from November, while still being up year-over-year.