Disastrous December 2018 Retail Sales Report

The December retail sales report was so terrible that it implies a recession is coming soon if the data is accurate. There’s always a chance the data is incorrect because these results are revised. This time there is a cloud over the report because the government was shutdown for part of December. There isn’t evidence that different methods were used to collect the data, but it’s worth noting since it is on everyone’s mind.

List Of Excuses For This Bad Report

Let’s review all the reasons this terrible report should be discounted before we dive into the details. The most obvious one is this is just one report. There have been other terrible retail sales reports this expansion that meant nothing. This one just happens to be worse than almost all of them.

Also, the November report was strong, so the month over month comparison was tough. Another positive argument is gasoline sales, which were hurt by lower prices, dragged down results. Furthermore, this holiday season had an extra week between Thanksgiving and Christmas in November, so that may have hurt sales in December. Some retailers reported Black Friday and Cyber Monday sales were amazing, but the rest of the holiday shopping season was unspectacular.

The volatile stock market could have hurt retail sales for the upper class at the time consumers usually buy their last minute gifts. The stock market doesn’t usually affect retail sales much, but this sharp decline made people who follow the stock market think the economy was on the precipice of a recession. This is the reflexivity effect where stocks cause the economy to weaken instead of predicting weakness. The signal became the catalyst. We don’t think the wet weather in the Midwest and Southeast is a good excuse for this poor report because online sales were also weak.

Headline Results

Overall monthly retail sales growth was -1.2% which missed estimates for 0.1% and November’s growth of 0.1%. That was the worst decline since September 2009. About 75% of these reports are within -1% and +1%.

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