Empty stores and a slowdown in retail as 2020 ends

It doesn’t look like it was a very strong Holiday shopping season, according to the retail sales report that came out on Friday.

Retail sales fell 0.7% in December from the month prior. Economists surveyed by Refinitiv expected sales to be flat. The Commerce Department also revised November's data lower from a 1.1% decline to a 1.4% drop.

America's economic recovery took a hit in the final months of 2020, and the retail sector hasn't been spared. Rising Covid-19 infections and renewed lockdown measures, as well as job losses, have weighed on consumer spending and were a drag on retail sales. The economy shed 140,000 jobs in December, the first decline since April.

And outside of a big month in autos and auto parts (up 1.9%) and higher prices at the gas pump inflating sales at gas stations (+6.6%), retail sales had a December decline of 2.1%. Ugly month, and another indication that the economy was in big trouble as 2020 ended.

Put it together, and retail sales took quite a hit for the last 2 months of the year, especially once you take out auto and gas station sales.

The retail sales report also gives the preliminary year-long totals for 2020, and it tells a lot in how our consumer tastes and needs changed in the COVID world. What’s funny is that if you slept through 2020 (lucky you!), woke up today, and saw these overall numbers, you’d think we had an unremarkable, slow-growth year with a bit of a pickup in Q4.

But there is a LOT of variance within those overall figures. To no surprise, the COVID World was a big boost for the Amazon.com-type businesses, and for places that sold groceries, home improvements, and other items that were geared toward a population that became more homebound in 2020.

On the other hand, mall-like stores suffered huge losses, as did other places that relied on Americans getting out and spending money on experience outside of their homes.

What’s odd about the declines in November and December is that there were seasonally-adjusted drops in sectors that had done well for most of 2020 (Non-store retailers -5.8% Dec, -1.6% Nov, Sporting goods/hobby/bookstores -0.8% Dec, -1.7% Nov) and ones that had already taken big hits (Department stores -3.8% Dec, -7.6% Nov, Bars/restaurants -4.5% Dec, -3.6% Nov).

Now, maybe some of that reflects the fact that there wasn’t nearly the increase in sales in November and December that we see in a Non-COVID Holiday shopping season, and maybe it’s simply that people spread out those type of visits over the course of the year. But the year-long declines in several areas are big red flags, and with mass vaccination still several months away, it’s going to be a significant struggle in many areas of the retail economy for quite a while.

And we know that COVID infections aren’t subsiding in much of the country, so the change in shopping habits that explains these disparate outcomes doesn’t seem likely to adjust back by much for the first half of 2021 (if not permanently). This means more aid is going to be needed to these industries and to out-of-work Americans that are getting hammered in the COVID World if we don’t want to see even worse disruptions that can bleed over into the parts of the retail economy that have gone unscathed and/or thrived.