US Retail Sales: A dose of skepticism – Wells Fargo

Data released today showed that retail sales dropped 1.2% in December, against expectations of a modest increase. Analysts at Wells Fargo explained that the fact that this was not the usual collection process opens up potential issues that makes them wary to believe that consumer spending is collapsing.  

Key Quotes:  

“We have a dose of skepticism regarding today’s reported drop in December’s retail sales. The weekly Redbook index for same-store sales was up more than 6% for every week in December.”

“The weak numbers could be a function of consumers continuing to shift their holiday shopping to November, when control group sales rose 1.0%. But, we think that issues surrounding the government shutdown may be at play. The Department of Commerce noted in its release that “data collection and processing were delayed.” It is possible that later collection led respondents to incorporate more of their January sales, which is typically the slowest month of the year for retailers.”

“With seasonal factors expecting a jump in December, the adjusted numbers were depressed more than usual.”

“Even if revisions are in order for December sales, this number will show up in the Q4 GDP release, and we will likely have to modestly cut-back our expectation for a 3.6% annualized pace of PCE in Q4.”

“This morning’s release suggests the economy entered 2019 with less momentum than we previously expected. However, with much of the release hard to square with other variables, we expect revisions may be in order, and are wary to believe consumer spending is collapsing.”