WASHINGTON — With the job market on a roll and gas prices falling, consumers are spending away, right? Not so fast. Americans actually cut back on spending last month after shopping freely in November, perplexing analysts who expected strong retail sales in December.
Retail sales fell a seasonally adjusted 0.9 percent from the previous month, the Commerce Department said Wednesday. That’s the largest drop since January 2014. Much of the decline occurred because gas station sales retreated sharply because of lower prices. But sales in most other categories also lost ground.
In Denver, however, some retailers report the news isn’t as grim as the national report suggests.
Kristen Tait, owner of Decade Gifts on Denver’s South Broadway retail strip, said her holiday shopping season kicked off with robust sales on Small Business Saturday on Nov. 29. That momentum, she said, continued through the end of the year.
“We had a great holiday season, and I certainly can’t complain,” Tait said. “I thought it was busier than last year, but my numbers show it was actually on par with 2013.”
There’s no need to worry yet. Consumers likely will bounce back in the coming months on the back of healthy job gains and rising confidence. Economists say many temporary factors likely held back sales in December.
Excluding the volatile categories of gas, autos, building materials and restaurants, sales dropped 0.4 percent after rising 0.6 percent in November. Online and mail-order sales fell 0.3 percent, the most since April.
The disappointing figures came after strong sales gains in November, which many economists said may have caused shoppers to pull back last month. And the financial benefit of falling gas prices also can take time to register with consumers. It may take a month or two of persistent savings before consumers begin to spend the windfall.
Park Meadows senior general manager Pamela Kelly reported that strong November traffic at the Lone Tree shopping center declined in mid-December.
The mall looks at vehicle traffic and a head count of those entering the mall to calculate traffic numbers.
Kelly will have to wait to see how traffic correlated to sales — her December sales numbers arrive at the end of January.
However, if hiring is an indication, she’s optimistic that sales should be good, citing the success of a 2014 mall-wide holiday job fair.
Hiring remains strong, on the upswing since the dark days of the 2008 economic downturn, Kelly said.
“Retailers started coming back to part-time holiday hiring in 2013, and this retail season they hired substantially more part-time workers,” she said.
With hiring still strong, consumer confidence rising and Americans’ household finances in better shape, most economists expect consumers to spend at a healthy pace this year, supporting solid economic growth.
“This isn’t the start of a collapse in activity … as that doesn’t fit with the strength of employment growth and consumer confidence,” Paul Diggle, an economist at Capital Economics, said in a note to clients. “As such, retail sales will strengthen again before too long.”
And holiday retail sales overall, which include November and December data but exclude gas, autos, and restaurant spending, were the highest since 2011, according to the National Retail Federation and some independent economists.
Denver Post staff writer Laura Keeney contributed to this report.
Reasons for the fall
Economists cited many reasons why sales fell off in December:
Retailers engaged in heavy discountingto boost shopper traffic, which lowers the dollar value of sales. The government’s figures aren’t adjusted for inflation. When consumer spending figures adjusted for price changes are released next month, they may paint a better picture of consumers’ health, economists said.
The holiday shopping season is getting stretched at both ends. Many stores launched the holiday season as early as October and even pulled forward Black Friday promotions days before the Thanksgiving weekend. That likely led to weaker December sales.
While hiring has been healthy, Americans’ paychecks aren’t getting any fatter. That limits their ability to spend. Average hourly pay slipped in December, the government said last week, and rose just 1.7 percent last year. That’s only slightly ahead of the 1.3 percent inflation rate.
Americans have worked hard to repair their finances since the Great Recession, reducing their debt as a percentage of income back to 2003 levels. Still, they are reluctant to run up their credit cards: Total credit card debt fell in November from the previous month, the latest data available. It is still far below pre-recession levels.
The Associated Press
