On Thursday, the Commerce Department reported that retail sales dropped to its lowest level in nine years, which evidenced a drop in economic activity near the end of 2018 as markets were getting roiled by volatility.
Looking at the data, the Commerce Department reported retail sales fell 1.2 percent, its largest drop since September 2009 as the financial crisis took a hold of the capital markets. In addition, November data was revised lower to show retail sales were up 0.1 percent as opposed to the previously reported 0.2 percent.
Economists polled by Reuters were forecasting retail sales to be up 0.2 percent in the month of December.
“This number was terrible,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group, in a note. “The US consumer is holding the global economy on its shoulders. After seeing today’s data, we better hope it was a one month outlier and that the rebound in stocks in January and month to date will revive consumer spending.”
Certain retail ETFs weren’t deeply affected by the data like the SPDR S&P Retail ETF (NYSEArca: XRT), Amplify Online Retail ETF (NadaqGM: IBUY) and VanEck Vectors Retail ETF (NYSEArca: RTH). XRT rose 0.09 percent, while IBUY was down slightly at 0.26 percent and RTH ticked 0.32 percent lower.
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Slower Growth Was Expected
Earlier this year, the National Retail Federation (NRF) projected retail sales figures to grow from 3.8 to 4.4 percent, which is lower than the 4.6 percent growth experienced in 2018. Whether it hurts the ETFs will depend on how the market interprets the data, but the NRF says the forecast comes “despite threats from an ongoing trade war, the volatile stock market and the effects of the government shutdown.”
The 35-day government shutdown prevented the release of December’s retail sales data from the Commerce Department. According to the NRF, sales this year should total more than $3.8 trillion–a figure that does not include sales from automobile dealers, gasoline stations and restaurants.
Additionally, the NRF numbers showed a continuing trend of growing online sales as consumers shift from brick-and-mortar stores to the internet. Online and non-store sales rose 10.4 percent higher last year and the NRF is predicting more of the same for 2019.
For more information on the consumer sector, visit our consumer discretionary category.