Retail Sales Increase More Than Expected in December

The Census Bureau’s Advance Retail Sales Report for December revealed a 0.6% rise in headline sales compared to November, highlighting a second straight month of increased consumer spending. The latest figure was higher than the anticipated 0.4% monthly growth. For an inflation-adjusted perspective on retail sales, take a look at our Real Retail Sales commentary.

Retail Sales MoM - 2 years

Here is the introduction from today’s report:

Advance estimates of U.S. retail and food services sales for December 2023, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $709.9 billion. That’s up 0.6 percent (±0.5 percent) from the previous month, and up 5.6 percent (±0.7 percent) above December 2022. Total sales for the 12 months of 2023 were up 3.2 percent (±0.4 percent) from 2022. Total sales for the October 2023 through December 2023 period were up 3.9 percent (±0.4 percent) from the same period a year ago. The October 2023 to November 2023 percent change was unrevised from up 0.3 percent (±0.3 percent)*.

Retail trade sales were up 0.6 percent (±0.5 percent) from November 2023, and up 4.8 percent (±0.5 percent) above last year. Nonstore retailers were up 9.7 percent (±1.6 percent) from last year. Food services and drinking places were up 11.1 percent (±2.3 percent) from December 2022.

The chart below is a log-scale snapshot of retail sales since the early 1990s. The three exponential regressions through the data help us to evaluate the long-term trend of this key economic indicator.

  1. The red line is a linear regression through the complete data series.
  2. The green line is a regression from the start of the series through the end of 2007 and then extrapolated to the present – thus excluding the Financial Crisis.
  3. The blue line is a regression from the start of the series through the end of 2019 and then extrapolated to the present – thus excluding the COVID-19 pandemic.

Monthly retail sales have been above the red and blue line since March 2021. This signals increased consumer spending that was most likely pent up as a result of the pandemic.

Monthly Retail & Food Services Sales

The year-over-year percent change provides another perspective on the historical trend. Current retail sales are up 5.6% compared to December 2022. Here is the headline series with a callout to the most recent 12 months.

Retail Sales YoY

Core Retail Sales

Core sales (ex Autos) also beat expectations by increasing 0.4% in December compared to the expected 0.2% growth.

Retail Sales Core MoM 2 Years

And core retail sales are up 4.5% compared to December 2022. Here is the year-over-year chart of core retail sales with a callout to the most recent 12 months.

Retail Sales Core YoY

Retail Sales: “Control” Purchases

The next two charts illustrate retail sales “control” purchases, which is an even more “core” view of retail sales. This series excludes motor vehicles & parts, gasoline, building materials as well as food services & drinking places. The popular financial press typically ignores this series, but it’s a more consistent and reliable reading of the economy. Retail sales control purchases increased 0.8% in December.

Retail Sales - Control

Similar to the retail sales snapshot chart earlier, the chart below is a log-scale snapshot of control purchases since the early 1990s. It includes two of the exponential regressions previously mentioned.

Retail Sales - Control

Here is the same series year-over-year. Current control purchases are up 5.5% compared to December 2022.

Retail Sales Control YoY

For a better sense of the reduced volatility of the “control” series, here is a YoY overlay with the headline retail sales. Note that the two series follow each other closely. But headline sales have more extreme highs and lows than the control series.

Retail Sales Headline and Control YoY

Bottom Line: Retail sales rose for a second straight month in December as all three series (headline, core, and control) increased from November and beat expectations.

Retail sales will impact interest in the SPDR S&P Retail ETF (XRT), VanEck Retail ETF (RTH)Amplify Online Retail ETF (IBUY), and ProShares Online Retail ETF (ONLN).

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