Bah Humbug on the 'Doom and Gloomers'

Here Are Two Reasons Why

The headlines trumpeted that Retail Sales fell in November, a move that many did not see coming. For the record, Retail Sales are on track with our forecast. The concern raised by others regarding November’s drop is that consumers have pulled back, and that could signal trouble for the economy in 2021. It doesn’t look that way to us here at ITR Economics.

"Retail Sales" is a very broad descriptor that encompasses store and non-store sales. A more complete definition is provided below¹. The US Census Bureau reports a 1.3% decline in Retail Sales from October to November. The last time November came in below October was in 2008 (-4.1%). Before that, it happened in 2003 (-0.9%) and 2001 (-1.4%); US GDP continued to rise in the fourth quarters of 2003 and 2001.

Takeaway #1 is that the unsettling November decline in Retail Sales does not negate GDP rise in the fourth quarter and/or negate our forecast of ongoing recovery in 2021.

Retail Sales for the year as a whole are on track to come in above 2019. Here is how we know. Let’s assume a weak scenario to finish the year. For instance, the 2018 November-to-December rise of 7.4% was the mildest in post-World War II history. To put that in perspective, the average for the last 10 years is 13.3%. A repeat of 2018’s anemic rise would push the 4Q20 3MMT to 2.5% above 4Q19. The entire year would come in just slightly above all of 2019. Even a rise that is one half of 2018’s weakest-on-record rise would still result in a positive 3/12 of 1.3% and ongoing 3MMT rise.

Takeaway #2 is that it would take a stunningly and improbably poor December to have the last quarter of 2020 come in below the year-ago quarter.

There are many segments that make up Retail Sales, e.g., groceries, furniture, general merchandise, electronics, etc. They are not all moving upward, nor will they all see the same upward trend dynamic. We suggest that you go to our website, itreconomics.com, and use DataCast™ at no cost for 30 days to determine how your business compares to Retail Sales and to the Retail Sales segments most salient to your firm. We are forecasting that the Retail Sales 12/12 will ascend to an early-2022 peak before easing lower in Phase C into 2023. DataCast will let you see if you can plan on a similar length of rise in your company 12/12. Knowing that will greatly aid in your asset allocation and resource planning for 2021. You will be able to plan with confidence in terms of inventory needs, advertising and marketing budgets, and supply chain requirements. Please reach out to us at our website or email us at itr@itreconomics.com.



¹Total retail sales in the United States, including motor vehicles and parts, furniture and home furnishings, electronics and appliances, building materials and garden supplies, food and beverages, health and personal care products, gasoline stations, clothing, and other miscellaneous goods. Includes store and non-store retail sales. Non-store retailers include those that sell via television commercials, catalogs, the internet, etc. Source: US Census Bureau. Measured in trillions of dollars, not seasonally adjusted (NSA).

Alan Beaulieu
President