Retail Sales Unexpectedly Dive: Spotlight on Cars and the “Amazon Effect”

Retail sales rose a mere 0.1% in November according to the Census Department Advance Monthly Retail Trade Report.

by Mish

The increase was against an October reading revised from +0.8% to +0.6%. Effectively, sales declined, led by autos. Let’s dive into the numbers.

Advance Retail Sales Percentages

Amazon is clobbering general merchandise stores, especially department stores. L.D. stands for leased departments in stores.

For the year, sales at general merchandise stores are down 1.3% and department store sales are down a whopping 6.4%.

Sales at nonstore retailers, of which Amazon is the largest, are up 11.9%.

Advance Retail Sales Numbers

Auto sales and parts account for 20.75% of the 11-month total for 2016. For the month, sales declined 0.5%.

When auto sales finally give up the ghost, it will have a significant impact on total sales.

Parrots Squawking

The Bloomberg Econoday parrot has the usual squawk about things being better than they look.

Highlights
The details are a little bit better than the retail sales headline for November which could manage only a 0.1 percent gain. Auto sales, which had been very strong in prior months, fell 0.5 percent in the month for the sharpest drop since March. But most other components managed to show gains though only marginal ones with nonstore retailers (ecommerce) and electronics & appliance stores up only 0.1 percent as was the key general merchandise category.

But there is strength in the report as restaurants, up 0.8 percent, posted their best gain since February. This is a discretionary category that points to underlying consumer strength. Furniture and furnishings posted a very strong 0.7 percent gain with building materials and gardening equipment a respectable 0.3 percent. Gains for these two readings are consistent with strength in the housing sector.

Excluding autos, retail sales rose 0.2 percent while excluding both autos and gasoline, the latter not a major factor in the November report, sales also rose 0.2 percent. These are light gains for a month when consumer confidence shot higher, but outside of the monthly swing lower for autos, much of this report is constructive and won’t likely be holding down expectations for the holiday shopping season.

Rate Hike Skepticism

Reader Craig asked “Mish, why are you skeptical of 3 rate hikes in 2017? I would expect that the fed would be more than willing to do so under a Trump presidency.”

The short answer is Far more is promised by this Trump rally than he can possibly deliver.

Here’s the long answer:

Consumer confidence is high over Trump, for now. People are celebrating (or drowning their sorrows in beer at drinking establishments). This will last until realization sets in that Trump will not save the global economy, nor will he bring back jobs.

Auto sales won’t keep up their robust pace forever.

The retail store buildout is over. Amazon is eating everyone’s lunch.

One of the factors behind the hiring spree has been a proliferation of stores of all kinds everywhere. That rates to slow.

Finally, interest rates hikes are certain to impact housing. Perhaps there is one last push to “beat the hikes”, but then what?

Instead of crowing about people drinking, I suggest a serious look at the items above. Note that the Fed is hiking, with GDP for the full year flirting with a mere two percent, perhaps less.

Mike “Mish” Shedlock

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