According to the monthly Commerce Department report, retail sales, which account for about one-third of US gross domestic product, fell another 2.7% in December, after a downwardly-revised record 3.4% decline in October and a 2.1% drop in November. In the last quarter of the year, retail sales are down 7.7% from the same period a year ago, a staggering number. In the last year, total sales are down a record 9.8%. Wow.
Is there any good news in this report, you ask? Well, simply put, the data is not adjusted for any price changes. Consider gas prices, for instance, which have fallen by record levels in the past few months. The 15.9% drop in sales at gas stations is mostly due to the adjustment in prices, not demand destruction. So in reality, you have a less excruciating number than what was reported. Retail sales, x-gas is only down 1.4% for the month. Still bad, but much better than the initial -2.7% number, and inline with expectations. And gas wasn’t the only good or service in a deflationary spiral, so the total sales number seems likely to improve as well.
Once again, I must ask. Are consumers really cutting back in epic proportions, as it’s being reported, or is this just a case of extreme deflation? The CPI report will give us a better indication.
Report Details (via MarketWatch):
Sales excluding autos fell a record 6.7% in the past year.
For all of 2008, sales slipped 0.1% compared with 2007, the first decline in annual sales since the records began in 1992.
Sales were weak across the board last month. Only health and personal care stores managed to increase from November’s dismal results.
Some of the decline in sales can be attributed to falling prices. Economists believe consumer prices fell 0.8% in December; U.S. inflation data will be released on Friday.
Falling gasoline prices pushed sales at gas stations down 15.9%, punctuating November’s 18.3% plunge.
Stores selling general merchandise saw their sales fall 1.3% on the month, including a 2.3% decrease at department stores, the biggest drop in nearly five years.
Sales at clothing stores plunged 2.5%. Sales at sporting goods and other stores catering to leisure-time activities fell 0.4%.
Sales at auto dealers fell 0.7%, putting the drop for the past year at fully 22.4%.
Sales at furniture stores dropped 1.8%. Sales at hardware and garden stores fell 2.9%. Sales at electronics and appliance stores fell 1%.
Sales at food and beverage stores fell 1.4%, the biggest drop in nearly eight years. Sales at restaurants and bars skidded 2.2%, the biggest drop since September 2001.
Sales at health and personal care stores rose 0.4%.
Sales at nonstore outlets, such as catalogs and online stores, fell 1.9%.
Retail sales have fallen for the sixth straight month.
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