Not much thanks for low November retail sales

It's not been mentioned as much as other stories today, but we found out today about a subpar November for retail sales.

Americans spent $528 billion on retail and food services last month on a seasonally adjusted basis, up 0.2% from a year earlier, according to Friday’s report from the Commerce Department. The increase was less than the 0.5% economists surveyed by Bloomberg expected.

Many investors and traders focus on the so-called control group, which is considered a more precise read on the consumer because it excludes auto and gas sales as well as things like building materials and office supplies. Last month, control group sales rose just 0.1%, compared with an expected 0.3% increase and slower than the 0.3% rise in October.

Brick and mortar retailers in particular had a bad November, which isn’t what you want to read when you’re talking about one of the two big months in the Holiday shopping season. And as a reminder, I will note that these numbers are not adjusted for inflation, which rose by 0.3% last month.

Retail sales, seasonally adjusted Nov 2019 vs Oct 2019
Furniture/home furnishing stores +0.1%
Building material/garden supplies +0.0
Sporting goods/hobby/music/book stores -0.5%
Clothing stores -0.6%
Department stores -0.6%
Health/personal care stores -1.1%
Other types of retail stores -0.4%

Not good, but much like this week's unemployment claims data, the late Thanksgiving holiday may have played a role.

Thanksgiving came late this year, and that pushed Cyber Monday to Dec. 2. That means Cyber Monday sales weren’t picked up in the November data. Nonstore (read: online) sales rose by 0.8%, which economists note is below trend but probably on account of holiday timing.

“The bottom line is that the consumer sector remains solid, and this disappointing release should not be interpreted as barometer of either holiday spending or the state of the consumer sector in general,” said Ward McCarthy, chief financial economist at Jefferies.

Retail sales are volatile and often revised. If the weakness is about holiday timing, then that should mean the December numbers are that much higher. We won’t know until Jan. 16.

True, the figures we will see next month will tell the fuller story. But consumer spending growth does seem to have moderated in Q4 after a similar softening in Q3, and if December comes in low, it’s not a good sign for 2020, as there are few other areas of GDP growth at this time.

Not so busy last month.

One of those places that areas of the economy that were struggling were overall business sales in America, which was also released on Friday. Granted, these only go through October, so it may be a bit different now, but if we were heading into recession over multiple sectors of the economy, we’d see figures like this.

Sales
The combined value of distributive trade sales and manufacturers’ shipments for October, adjusted for seasonal and trading day differences but not for price changes, was estimated at $1,456.0 billion, down 0.1 percent (±0.2 percent)* from September 2019 and was down 0.1 percent (±0.3 percent)* from October 2018.

Inventories
Manufacturers’ and trade inventories, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $2,042.8 billion, up 0.2 percent (±0.1 percent) from September 2019 and were up 3.1 percent (±0.4 percent) from October 2018.

And these figures included a 0.5% increase in retail for October, so that tells you how weak things were in the other two parts (manufacturing and wholesaling). I'm not a CEO, but I'd think higher inventories and lower sales generally adds up to layoffs in the near future.

You can have all of the irrational exuberance about trade deals that you want. But I don’t see where USMCA and the handshake agreement with China is going to do much for the overall economy, and not just because the changes in the trade deals are relatively minor. It’s because the overall economy is acting maxed out and sluggish, which I suppose you would expect after 10 years of expansion, but also it makes you wonder how long the conundrum of low interest rates, low growth and mediocre wage growth can go on.

So when does the Bubble of debt and absurd optimism that finally pop, and pricks the Bubble that has put the DOW above 28,000 in a time of negative year-over-year profit growth? Speaking as someone who recognizes that we need to restore some balance between Wall Street and Main Street, it can’t come soon enough.