Holiday Shopping Failed to Boost Retail Broadly

Retail sales rose 0.3% in December following upward revisions to the previous two months. Holiday-related spending was mixed with strong gains at apparel and accessory stores but a large miss at more traditional department stores. Sales at department stores actually fell nearly 1% on a seasonally adjusted basis during the month and 5.5% for the year.

Online sales were not as strong on a month-to-month basis as many expected. Year-over-year gains in the online category surged but should be taken with a grain of salt. Last year, consumers actually pulled back during the last weeks of the holiday season in response to fears of a full-blown trade war with China.

Consumers entertained at home this season more than they went out. Spending on food and beverage stores was twice the pace of spending at restaurants. That reflects the rise in home sales and the focus on related spending. Spending on housing repairs and remodeling dominated gains during the last days of the holiday season; that reflects the pickup in home sales and mortgage refinancing that we saw in the summer and fall.

Spending at gas stations was strong, but that stemmed from a rise in prices at the gas pump more than a pickup in demand. Vehicle sales fell as record incentives in November were rolled back. Consumers have been careful to time their spending on vehicles to incentives.

Core retail sales, which feed directly into our measures of GDP, were up a stronger 0.5%. Real GDP looks like it rose at a 2.25% pace in the fourth quarter. That is slightly less than previous estimates suggested. Consumer spending held up but the pace slowed during the last months of the year. Core retail sales bucked the trend in overall sales and were revised down during the two previous months.

Bottom Line
Consumers showed up and spent during the last days of the holiday season. Those gains were not enough to lift all boats. We have already seen another surge in store closure announcements. Brace for more

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