Thursday, December 26, 2019

Lots of Holiday buying online, but not so much overall

As Christmas comes and goes, it’s time to start looking at what consumers may have spent for the Holiday shopping. And information from Mastercard indicates that the structural changes in the retail sector continue, with more sales happening online versus people buying stuff in stores.
E-commerce sales this year made up 14.6% of total retail and rose 18.8% from the 2018 period, according to Mastercard’s data tracking retail sales from Nov. 1 through Christmas Eve.

Overall holiday retail sales, excluding autos, rose 3.4%.

The increasingly preferred way to shop.

Not bad overall, although that’s also not accounting for inflation, so real sales are maybe up 1.5% vs last year. President Trump took to the Twitter-waves to imply that this was a big deal.
Well, no kidding that it’s “the biggest number in US history”. It would be major news if it WASN’T “the biggest number in U.S. history”, because it would mean the economy would be in a significant recession.

In fact, the preliminary retail numbers from Mastercard fell short of the amount of growth we had last year.
….Mastercard spokesman William Tsang, citing 2018’s 5.1% growth in total sales, said this year’s holiday sales growth was not the biggest ever….

The National Retail Federation had forecast U.S. holiday retail sales over the two months to increase between 3.8% and 4.2%. That compares with an average annual increase of 3.7% over the past five years.
In other words, decent, but not great. Same “slowing, but steady growth” story that we’ve had for much of the last half of 2019, but in fairness, that’s better than we were thinking it was going to look like a month ago.

Those Mastercard figures go along with the nationwide picture of November’s consumer spending that was released by the Commerce Department on the Monday before Christmas.
Personal income increased $101.7 billion (0.5 percent) in November according to estimates released today by the Bureau of Economic Analysis. Disposable personal income (DPI) increased $87.7 billion (0.5 percent) and personal consumption expenditures (PCE) increased $64.9 billion (0.4 percent).

Real DPI increased 0.4 percent in November, and real PCE increased 0.3 percent. The PCE price index increased 0.2 percent. Excluding food and energy, the PCE price index increased 0.1 percent.

The increase in personal income in November primarily reflected increases in compensation of employees, farm proprietors’ income, and personal interest income (table 3).

The $37.8 billion increase in real PCE in November reflected an increase of $22.6 billion in spending for goods and a $17.1 billion increase in spending for services (table 7). Within goods, spending on new motor vehicles was the leading contributor. Within services, spending on health care was the leading contributor.
The November increase came after softer numbers in the previous two months in both income and spending, and would be slightly better than a 3.7% annual rate of growth. But it also seems to echo the lines of “decently growing but not booming consumer sector.”

However, that wide difference between online sales jumping by nearly 19% but overall sales being up less than 3.5% seems to indicate that in-store numbers are going to be bad, and would likely mean that more stores are set to close in early 2020 after year-end earnings get tallied.

That’s going to raise your home's property taxes, because unless you live in a community with an Amazon Warehouse, you’re not likely to see that store’s tax base replaced in the near future. We don't consider that extra cost when it comes to evaluating retail spending figures these days, but maybe we should.

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