December Retail Sales Up A Surprising 0.2% Showing a Hint of Inflation

By Mark Lieberman

Managing Director and Senior Economist

Despite weakness in furniture, electronics and sporting goods, retail sales rose an unexpected 0.2 percent in December, the Census Bureau reported Tuesday. Economists had expected sales to be flat to November. But revised date for November showed sales rose 0.4 percent, not the 0.7 percent previously reported.

Excluding autos, retail sales in December were up 0.7 percent, the strongest month-month gain ex-autos since February.

The boost came in basics – strong increases in sales at food and beverage stores, clothing stores, health and personal care stores and gasoline stations. The average price of a gallon of gasoline nationwide rose to $3.209 in December from $3.186 in November according to data from the federal Energy Information Administration. In October, the average price of a gallon of gasoline was $3.285.

The combined month-month increase in food and beverage stores, clothing stores, health and personal care stores and gasoline stations was $2.3 billion, virtually all of the $2.5 billion increase in sales excluding autos.

With holiday entertaining, sales at food and beverage stores grew 2.0 percent in December and were 4.2 percent ahead of December 2012.  The month-month increase was the largest since October 2006 when sales at food and beverage stores rose 2.1 percent. The retail sales report is price-driven. Data in the report are “adjusted for seasonal variation and holiday and trading-day differences, but not for price changes,” according to the Census Bureau. The increase in sales at food and beverage stores could suggest higher food prices.

Auto sales though fell $1.5 billion from November to December, the largest month-month decline since October 2012. Year-over-year December auto sales were up almost $4.9 billion.

On a year-year basis, total sales were up 4.2 percent and for the quarter up 1.03 percent, just a tad below the 1.1 percent gain registered in the third quarter. Retail sales account for about 55 percent of consumer spending, the largest single component of GDP. The solid quarter boost the likelihood of a stronger than expected GDP report for the fourth quarter. GDP rose 4.1 percent in the third quarter.

A large share of third quarter GDP growth was attributed to inventory investment which, as the retail sales report suggests, proved to be a smart move by retailers.

Sales at clothing stores showed a solid 1.8 percent month-month gain after slipping 0.5 percent in November. December clothing store sales were up 5.0 percent year-year.

Restaurant sales were up 0.5 percent in December and 4.1 percent of December 2012.

Sales at housing related retailers – furniture stores, building and garden supply stores and electronics and appliance retailers – all slipped in December, a further reflection of a softening housing market, Electronics store sales were off 2.5 percent for the month and were down 1.1 percent from December 2012. Sales at building material and garden supply stores and furniture store stores each dropped 0.4 percent in December but were up 2.9 percent and 4.8 percent respectively form December 2012.

Sales at sporting goods stores were off 0.6 percent in December, holiday shopping notwithstanding, but up 4.1 percent from December 2012.

By the numbers, retail sales increased just under $1.0 billion in December and November’s originally reported $2.9 increase was scaled back to $1.9 billion.

Sales at non-store retailers – largely online shopping – rose 1.4 percent to $39.1 billion.

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