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Retail Sales Finish 2018 on a Sour Note

| March 08, 2019

Consumer spending makes up approximately two-thirds of US economic output. Therefore, the attitudes of US consumers and their pace of spending is an important indicator of the overall health of the US economy. One of the data points used to track consumer spending is the retail spending report published by the US Commerce Department.

After a delay in releasing the data due to the government shutdown in January the Commerce Department issued its December report in mid-February. The report shows that the holiday shopping season may not have been as good as some expected with spending starting out strong in November but then falling off sharply in December. According to the official report retail sales declined 1.2% in December, the worst reading since 2009.

The official retail sales report seems to echo the comments made by many retailers during their fourth quarter earnings reports. A number of retailers, especially those in the brick and mortar category, reported that holiday sales started strong, perhaps due to deep discounts to lure in shoppers, but dropped off sharply later in the season.

However, the Commerce Department data shows that nearly every major category reported a decline, including online sales. Therefore, the data may indicate an overall slowing in consumer spending rather than a shift form physical stores to online shopping. Naturally, this weak report has raised some concerns about the willingness of consumers to continue spending at the same pace going into 2019.