Retail: Sales Decline for Third Month on Pandemic Effects

Retail sales declined for the third consecutive month as the pandemic rages on in most parts of the U.S. Restaurants were the hardest hit, as their sales fell 4.5% in December, following a 3.6% decline in November. Their sales are now back to early-July levels. In-store sales declined 0.3% in December, but that obscures a mix of good and bad news: Department store sales dropped 3.8%, and furniture, groceries, general merchandise and sporting goods all showed moderate declines. On the plus side, clothing, autos, building materials, health store and personal care sales all showed moderate increases. Total sales excluding gasoline fell 1.2% in December.

A huge 5.8% drop in non-store sales, mostly e-commerce, is confounding. Excluding this drop, aggregate sales would have been nearly unchanged in December. There are two possible explanations for this fall-off in e-commerce: First, warnings about shipping delays before Christmas may have pushed what would have been December sales into November as consumers ordered early. Second, the Census Bureau’s monthly e-commerce sales data has shown quirky behavior in the past, notably in December 2018, when reported sales dropped unexpectedly, but then completely rebounded in January 2019. Something similar could be happening in this report as well.

Even though sales showed monthly declines, holiday sales were still above last year’s. Holiday sales of in-store goods were 4.8% above last year, though only 2.8% higher if building-store sales are excluded. E-commerce sales were roughly 27% higher than last year. Of course, not all stores have done well. Clothing, electronics and department stores have a lot of ground to make up to get back to last year’s sales level.

Restaurants still can’t catch a break. Indoor dining is likely to remain severely limited by local and state governments in many parts of the country for a while, and warmer weather suitable for outdoor dining is a long ways off in many states. Many restaurants have already run out of cash and have closed their doors. However, those that can survive the winter will likely experience boom times once the restrictions are lifted and people feel comfortable going out again.