Holiday spending is solid but uneven, retail sales data shows

In the waning days of 2022, a month punctuated by a healthy Black Friday-Cyber Monday delivered only a small token of growth to retail top-lines.

According to unadjusted figures released by the US Commerce Department on Wednesday, retail sales grew 6.5% year-over-year in November. Sales grew 1.8% for the month from October, according to those figures.

Even as sales rose overall, this marked a “deceleration” from previous months, said Neil Saunders. The managing director of retail at analytics and consulting company GlobalData noted that the pace of growth was the lowest of the year so far, and the slowest since February 2021.

“This is partly because last year November was very robust as consumers splashed out over Black Friday and the Cyber period,” Saunders said. “However, some is also down to the consumer running out of steam and being more discerning about what they buy.”

Yet the story is not purely one of a slowdown. A primary focus of November sales is on the Cyber Week period, and on this front retailers “passed the first test of the holiday season,” Saunders said. Still, there were signs of softness in popular categories like electronics and home goods, while smaller gifting categories saw an uptick.

“Black Friday and Cyber Monday were solid for both online and stores. However, the pattern of demand was very uneven,” Saunders said. “Certain categories, like electronics, did badly as people cut back. Others like apparel and sporting goods did much better. People seemed to be more focused on buying essentials and things they needed for the holiday rather than splashing out on big purchases.”

Retailers’ bottom lines may take the most visible hit. The consumer pullback is making discounts the most sought-after prize of this holiday season, and that is likely to eat into profit margins.

Here are a few more trends that stand out from November's retail sales data:

Ecommerce outpaces overall retail: Sales at nonstore retailers, which is the category that includes ecommerce, grew 7.7% year-over-year. In this case, the Turkey 5 set the table. Salesforce reported that online Cyber Week sales grew 9% year-over-year.

Inflation spike: Sales grew significantly in the categories that continue to be most affected by inflation. Since the Commerce Department doesn’t adjust for inflation, this indicates that price increases continue to have a big impact on overall sales totals. On an unadjusted basis, food service sales grew 13.6% year-over-year, while gas station sales grew 15.4% year-over-year.

Prelude to a tougher 2023? Core categories showed more bumpiness. Take away food, gas and auto sales, and retail sales grew 5.6% unadjusted for the year. After holding steady for months, there are also signs that retail sales are starting to trend in line with overall economic patterns. Home goods sales tend to follow the housing market, which has hit the brakes in recent months. Meanwhile, the underlying patterns of slowdown here come just a day after economic forecasts from the Federal Reserve that show interest rates having a bigger impact on the job market and economic growth in 2023. In 2022, the question has been whether retail sales could survive this bout of inflation intact. Having mostly done that, the question for 2023 is whether their decline will become a side effect of the Fed’s medicine to cure it.