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U.S. retail sales data from the federal government for the holiday shopping month of December was released on Wednesday morning.
On a seasonally adjusted basis, the US Commerce Department reported that overall sales results were the following:
- Monthly: Sales declined 1.1% from November.
- Annually: Sales rose 6% from December 2021.
- Nonstore sales, which includes ecommerce, grew 13.7% year-over-year, while falling 1.1% for the month.
- Core retail sales, which exclude food service and auto measures, grew 5% year-over-year, according to GlobalData’s calculation.
While retail sales continue to grow, there are signs of a slowdown. Year-over-year growth for December 2022 posted the slowest growth in 22 months, according to GlobalData Managing Director Neil Saunders. The rate of increase has nearly halved since August, when it was 10.2%.
“Some of this is down to moderating inflation, but some is also a consequence of a more pressured and concerned consumer who has become more frugal about spending,” Saunders said. “If this pattern is emerging over the holidays – a time when people tend to throw caution to the wind as they spend to enjoy themselves – it does not bode well for the sober months of January and February which are traditionally more subdued and constrained as consumers assess their finances and pay down holiday debt.”
What the holidays say about 2023
The latest data offers another warning sign: Things may get harder in retail in 2023. Saunders said that recent months have shown that it is “quite clear that the year ahead will be much tougher” than 2022. But he warned that it is important not to be “overly pessimistic.” Consumer spending has mostly held up over three years of a pandemic, supply chain chaos and inflation. At the same time, the inflation rate is coming down.
“As such, what we are likely to see is a trimming at the edges of retail, as people continue to adjust behaviors and shopping patterns to make ends meet, rather than a full-blown retail recession,” Saunders said.
Inflation remains high in some categories, offering a reminder that this period of high prices is not yet over just because the calendar turned to a new year. The price increase in food for December was 11.8%, according to the Consumer Price Index. That was well ahead of the 6.5% overall inflation rate, and continues to lead consumers to make choices.
“Across the whole holiday period our data show that consumers were working hard to reduce costs by trading down to value retailers, buying more own brand product, and modestly cutting the amount they buy,” Saunders said. “Many households were less wasteful with food over this holiday period, and retailers had to work a lot harder to stimulate sales.”
The month-over-month decline seen this month is also a somehwat ominous sign, but there could be a silver lining, according to a note from Bank of America Global Research. While the bank's economists said holiday spending appears "soft," technical details of the data could provide a lift to start the year.
"Seasonal factors have not fully adjusted for the shift to more front-loaded holiday shopping since the start of the pandemic," BoA wrote. "Therefore, the seasonal adjustment likely exaggerated the weakness in retail sales in December. If this is correct, we should see a big bounce in retail sales, and consumer spending more broadly, in January."
Wholesale prices decline
Another sign of easing inflation showed up in the U.S. Commerce Department’s report on wholesale prices.
Prices for goods before they reach retail declined 0.5% in December.
The year-over-year wholesale inflation rate was 6.2%, the lowest of the last 12 months.
This was driven by a sizable decrease in the price of goods at 1.6%. Energy prices also declined 7.9% for the month.
This came after an increase in wholesale prices in October and November.
The Producer Price Index tends to be a forward-looking measure of inflation that tracks prices of goods and services before they reach consumers.
Trending in Retail Channels
Labor disputes on the West Coast could cause further disruption heading into peak season.
When the first half of 2023 is complete, imports are expected to dip 22% below last year.
That’s according to new data from the Global Port Tracker, which is compiled monthly by the National Retail Federation and Hackett Associates.
The decline has been building over the entire year, as imports dipped in the winter. With the spring, volume started to rebound. In April, the major ports handled 1.78 million Twenty-Foot Equivalent Units. That was an increase of 9.6% from March. Still it was a decline of 21.3% year over year – reflecting the record cargo hauled in over the spike in consumer demand of 2021 and the inventory glut 2022.
In 2023, consumer spending is remaining resilient with in a strong job market, despite the collision of inflation and interest rates. The economy remains different from pre-pandemic days, but shipping volumes are beginning to once again resemble the time before COVID-19.
“Economists and shipping lines increasingly wonder why the decline in container import demand is so much at odds with continuous growth in consumer demand,” said Hackett Associates Founder Ben Hackett, in a statement. “Import container shipments have returned the pre-pandemic levels seen in 2019 and appear likely to stay there for a while.”
Retailers and logistics professionals alike are looking to the second half of the year for a potential upswing. Peak shipping season occurs in the summer, which is in preparation for peak shopping season over the holidays.
Yet disruption could occur on the West Coast if labor issues can’t be settled. This week, ports from Los Angeles to Seattle reported closures and slowdowns as ongoing union disputes boil over, CNBC reported. NRF called on the Biden administration to intervene.
“Cargo volume is lower than last year but retailers are entering the busiest shipping season of the year bringing in holiday merchandise. The last thing retailers and other shippers need is ongoing disruption at the ports,” aid NRF Vice President for Supply Chain and Customs Policy Jonathan Gold said. “If labor and management can’t reach agreement and operate smoothly and efficiently, retailers will have no choice but to continue to take their cargo to East Coast and Gulf Coast gateways. We continue to urge the administration to step in and help the parties reach an agreement and end the disruptions so operations can return to normal. We’ve had enough unavoidable supply chain issues the past two years. This is not the time for one that can be avoided.”