Retail sales in the U.S. finished 2016 on a somewhat positive note, posting the fourth straight monthly gain, according to a new Commerce Department numbers released Friday. Separate reports show improvements in spending during the holidays, business inventories, and consumer sentiment.
The 0.6% increase in retail sales from the month before is slightly less than many analysts were forecasting and follows a revised 0.2% improvement in November from October. Retail sales are important to both trucking and the overall economy because they drive a big portion of economic activity and a lot of freight.
The December level is 4.1% higher than the same time a year ago, while total retail sales for 2016 were up 3.3% from 2015. This compares to a 2.3% year-over-year bump in 2015 vs. 2014, and 4.2% in 2014 over 2013.
Helping push December’s level higher was a 2.4% jump in new auto sales, the biggest increase since April. Sales at gasoline stations improved 2.2%, due mainly to higher prices. Excluding these two areas, however, retail sales were essentially flat in December, with the weakest reading since July.
Sales at non-store retailers, which includes online outlets, moved 1.4% higher in December and advanced 11.4% in 2016 over 2015.
“The retail sales data, on balance, remains consistent with our forecast that overall consumer spending continued to grow and at a solid 2.4% [annual] pace in the fourth quarter of 2016, although that would still be down modestly from a 3% jump in the third quarter,” said Nathan Janzen, senior economist at RBC Economics. “Strong consumer spending growth is being supported by further improvement in labor markets, although increasingly reflecting stronger wage rather than employment growth as labor markets tighten and low interest rates.”
He said interest rates are expected to drift gradually higher, but likely at a modest pace. Coupled with further labor market improvement and potential income tax cuts, that should leave a still supportive backdrop for consumer spending going forward.
Holiday Sales Improve 4% Over Previous Year
The National Retail Federation also released numbers Friday showing retail sales over the holidays increased 4% to $658.3 billion compared to the same time a year earlier, exceeding the group’s earlier forecast of a 3.6% increase. The number includes $122.9 billion in non-store sales, which were up 12.6% over the year before, better than the 7% to 10% increase NRF forecast earlier.
“These numbers show that the nation’s slow-but-steady economic recovery is picking up speed and that consumers feel good about the future,” NRF President and CEO Matthew Shay said. “Retail mirrors the economy. And while there might have been some bumps in the road for individual companies, the retail industry overall had a solid holiday season and retailers will work to sustain this in the year ahead.”
Inventories Improving as Spending Growth Continues
A Commerce Department report Thursday showed U.S. wholesale inventories increased 1% in November following a 0.1% drop the month before – the largest gain in two years.
Meantime, a Friday report on manufacturing and trade inventories, also from the Commerce Department, showed a 0.7% increase in November, offsetting a decline in October. And the ratio of inventories to sales rose slightly from 1.38 to 1.39 but is down from a year earlier.
Many analysts feel this latest performance shows businesses are once again building up their inventories, which should help spur more economic growth. Early last year, inventories were too high and received some of the blame for slower economic numbers (and lower freight numbers) through the first half of 2016, when the overall economy expanded at an annual rate of just 1% before improving to a rate of 3.5% in the third quarter of the year.
Fourth quarter and total 2016 numbers aren’t set for release until late January; however, many analysts are expecting the final three months of last year to show GDP growth of just below 3%.
Consumers Feel Good, But Concerned About President-Elect
All this increased spending on retail items as well as better overall economic performance is largely due to better consumer sentiment, according to results from the University of Michigan Survey of Consumers released Friday. However, the incoming Trump administration is causing some concern among respondents.
Its Current Conditions Index rose 0.5% to reach its highest level since 2004. The Expectations Index fell 0.6 percentage points, but that was lower than only the 2015 peak during the past dozen years.
“The post-election surge in optimism was accompanied by an unprecedented degree of both positive and negative concerns about the incoming administration, spontaneously mentioned when asked about economic news," according to Surveys of Consumers Chief Economist Richard Curtin.
“The importance of government policies and partisanship has sharply risen over the past half century…these extreme differences would imply either strong growth or a recession,” he said. “Since neither is likely, one would anticipate that both extreme views will be tempered in the months ahead.”
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