US Retail Sales Drop 1.1% in November

The most recent U.S. Retail Sales Report shows a decrease in retail sales in November, dropping 1.1% since October but up 4.1% since this time last year. Total sales for September through November 2020 were up 5.2% year over year. Sales had been increasing since June after record lows were seen in the spring during the height of the coronavirus pandemic, but infections have been on the rise and many households are still experiencing unemployment.

Clothing and accessory stores saw a 6.8% decrease from October, and sales were down 16.1% unadjusted year over year. Department store sales were also down 7.7% from October, as were sporting good stores, which saw a decrease of 0.6% month over month.

Online and other non-store sales rose by 0.2% last month and were up 29% unadjusted since November 2019. This reflects consumers continuing to shop online due to the ongoing pandemic and starting their holiday shopping early. Health and personal care stores, such as drug stores, saw a decrease of 0.7% from October but an increase of 3.5% year over year. Building and garden supply stores saw a small month-over-month increase of 1.1% but rose 18.7% unadjusted year over year.

Restaurant and bar sales saw a 4.0% decrease from October, and sales are down 17.2% from this time last year. Food and beverage stores are up 1.6% month over month and were up 10.9% unadjusted year over year.

Car and parts dealers saw an increase in sales of 6.0% year over year but decreased 1.7% month over month. Gas station sales were down 2.4% since October and were down 17.1% since November 2019.

The Retail Sales Report Can Predict Economic Growth

The U.S. Census Bureau report measures the U.S. retail industry each month by surveying about 5,500 employer firms to collect retail sales data. It shows the total sales and the percentage change for that month and also reports on the percentage change in year-over-year (YOY) sales for the last 12 months.

Retail sales signal trends in consumer spending, which drives almost 70% of economic growth. The retail industry alone supplies almost 52 million jobs. In addition to retail, personal consumption expenditures include services like housing and health care. 

Since the retail sales report comes out monthly, it is a more current measurement of economic health than gross domestic product, which is reported quarterly. You can use the retail sales report to predict GDP before that news comes out. Keep in mind that the retail sales report doesn't adjust for inflation, while GDP does.

GDP is an annualized number. GDP growth compares this annualized figure to the prior year. Keep in mind that GDP growth uses real GDP figures and they eliminate the effects of inflation. The YOY retail sales reports use nominal GDP figures. GDP growth reports and YOY retail reports could have significant differences if inflation is very high or if there is deflation. 

When using the retail sales report for forecasting, you should also look at other statistics. Most importantly, look at orders for durable goods—that's another great leading economic indicator. 

Pay attention to forecasts for specific holiday sales. The National Retail Federation (NRF) surveys shoppers to find out how much they plan to spend on the major holidays. The report on Halloween spending provides early clues for the holiday shopping season. The NRF also reports on retail sales for Valentine's Day, Mother's Day, Father's Day, and Back to School. 

Retail Sales Outlook

In February 2020, the NRF had predicted 2020 retail sales would grow between 3.5% and 4.1%. That was before the COVID-19 pandemic caused states to issue shelter-in-place orders. Just one month later in March 2020, the National Retail Federation predicted that the industry would lose $430 billion in revenues in the third quarter of 2020. At least 630,000 non-essential retail outlets have already closed during the pandemic.

Jan Rogers Kniffen, a retail industry consultant, estimated that 30 well-known brands might be forced to file for bankruptcy protection, according to an article by PYMNTS.com. Many retailers may have trouble meeting loan obligations. and apparel retailers may have a hard time selling out-of-season apparel. They may have to cancel orders with manufacturers, too.

While retailers saw improved sales as shelter-in-place orders were lifted, many states are implementing curfews and other measures as infection rates continue to rise. A real recovery won't occur until a safe and effective vaccine is developed. In this pandemic, the future of retail depends on a virus.