Retail Sales Landmine

Ignore Black Friday and Cyber Monday. Those are merely an appetizer, an intentional preamble to whet the appetite of hungry consumers looking to splurge. The real action comes in December. People look, some buy, after Thanksgiving, but as anyone counts down the actual twelve days of Christmas and celebrates the eight crazy nights of Hanukkah that’s when the retail industry makes its bank.

In 2016, the month of December was just one-twelfth of the calendar, 8.3% of all months, but counted for 9.8% of all US retail sales. It was almost exactly the same ten years before. December 2006 brought in 9.73% of all revenues estimated for that whole year.

While there were some whispers about housing during that particular holiday season, the noise was deafening one year forward during Christmas 2007. There was no longer any doubt that market volatility and uncertainty were carving into the US economy. Many hoped and prayed Ben Bernanke could limit the damage with his genius inputs, maybe avoiding a nasty recession in 2008, but it was already bad by then.

Consumers had begun to react negatively. On January 15, 2008, the Census Bureau reported the sad news. Christmas had been a bust, economic dangers were growing and even the holiday shopping season hadn’t been spared. The advance estimate for retail sales showed they had declined by 0.4% month-over-month on a seasonally adjusted basis. Unadjusted, total sales had gained just 4.1% from the year before or far below the 6% level which historically indicates trouble.

As we know now, just as many had surmised back then, December 2007 was the first month of the Great “Recession.” Over the many years that have followed, Census Bureau economists have recalculated retail sales (and other accounts) to more accurately reflect that sordid state.

The latest benchmarks show retail sales were up just 1.93% year-over-year that particular December, half the initial unadjusted estimates. The monthly change in the seasonally adjusted series was marked down to an enormous decline, -1.20% or three times worse than the original -0.4%. The economic damage was already deep long before the FOMC truly reacted.

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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