ITR Experts Say: Bad Data, Not Disaster, Struck December Sales

After a several-week delay, thanks to the government shutdown, the US Census Bureau finally released December 2018 Retail Sales data, and the results were frightening. Frightening at a cursory glance, that is. After a deeper dive, the figures do not pass the smell test.

As currently reported, December 2018 nominal Retail Sales came in at roughly $570.0 billion. While an impressive sum on the surface, it represents a relatively thin 8.6% increase from the November 2018 level. This would grade as the slowest December month-to-month gain in consumer spending on record – a record extending back 72 years! If US consumers truly posted the worst December holiday spending performance on record, it would be a nightmare for US retailers.

We feel this figure is anomalous and likely the outcome of disrupted data collection during the government shutdown for a few reasons:

• The seasonal rising trend in consumer spending though November was moving at a relatively strong clip and showing no overt signs of distress.
• In fact, it was strong relative to the last 10 or so years, and well above average for this century.
• Though our other exogenous leading indicator inputs do point to some distress, none of them can corroborate or support a "worst-ever" pullback from the consumer.

Perhaps the most compelling news refuting the US Census Bureau data comes from Walmart, which on Feb. 19 reported its best holiday quarter earnings in over a decade, significantly beating analyst projections in the process. Part of Walmart’s strong quarter did stem from the closing of Toys R Us, which offered additional share in the toy market for the holiday season. Still, it is hard to reconcile expectations-beating holiday-quarter growth from America’s largest retailer with the disastrous industry data.

That is not to say it will be clear sailing for the consumer in 2019 – far from it, in fact. My colleague Catherine Putney will be detailing the challenges facing the US consumer in 2019 in the ITR Economics February Retail Sales Webinar. With the shutdown behind us, we expect the US Census Bureau will recover and try to "clean up the noise" in the December data and hopefully give us a clearer picture moving forward.

For now, the sky is not falling – but it is getting darker. 

Connor Lokar
Economist