The Death of Retail Sales May Have Been Premature

Jon C. Ogg

It was not that long ago that the financial markets had to deal with serious disappointment in the December figures for retail sales. There was some thought at the time that data were missing due to the partial shutdown or that the serious market correction and weak economic numbers with China-trade woes all acting against the trend. Retail sales for January posted a strong snapback rally, although the weakness from December was revised even a tad lower rather than higher.

The U.S. Department of Commerce reported that total retail sales posted a seasonally adjusted 0.2% gain to $504.4 billion. Dow Jones (WSJ) was looking for a flat number. Spending was strong in restaurants, building materials, garden equipment, sporting goods, hobbies and book stores.

Retail sales for December was revised to −1.6% from −1.2%. There had been a market bias that an upward revision would be coming.

If you go for core retail sales, which is all sales minus autos and gasoline, that figure was up by 1.2%. This was the strongest gain since last May, and it reversed a 1.6% drop in December and signals that the U.S. consumer is not flailing in the wind. Gasoline spending was down 2%.

The Commerce Department indicated that data collection and processing were delayed for this indicator release due to the lapse in federal funding from December 22, 2018, through January 25, 2019. Processing and data quality were monitored throughout, and the Commerce Department indicated that response rates were at or above normal levels for this release.

Monday’s report will help to curb some of the caution that has built around the consumer spending metrics. This really matters, with roughly two-thirds of gross domestic product tied to consumer spending.