Retail and food services sales in America fell by 1.1 percent in November to $546.5 billion, according to a report out this week from the U.S. Census Bureau. That was the largest decline of the reopening, much worse than the consensus estimate, and the previous month’s gain was revised lower. “Core” retail sales, which exclude the volatile automobiles and energy components, also disappointed forecasts in November (-0.8 percent vs. +0.2 percent), as did “control group” retail sales (-0.5 percent vs. +0.1 percent) which better track consumer demand trends, and both gauges similarly saw their October gains revised lower. Despite the weak headline numbers this moderation in retail sales growth should not be surprising given how rapid the recovery was following the lifting of the lockdowns earlier this year, and even after November’s “pullback” total consumer spending is still well above the pre-pandemic peak.
The winter wave of the coronavirus has exacerbated the slowdown in consumption, and this can be seen (below) in the reversal over the past two months in spending at food services and drinking places versus spending at food and beverage stores. Put simply, Americans are dining out less and dining in more as activity restrictions have returned in many areas of the country. This is supported by a recent Gallup poll which found that 50 percent of U.S. adults reported practicing stricter social distancing in November, up sharply from 38 percent in October and the highest reading since May. On the bright side many of these headwinds will quickly abate as the COVID crisis fades, and the recent string of encouraging vaccine rollout headlines suggests this outcome may be closer than previously believed. Further, the latest survey of consumer expectations from the Federal Reserve Bank of New York found that Americans’ year-ahead spending growth plans rose sharply in November to 3.7 percent, the best reading since 2016. The increase was notably driven by those with household incomes below $50,000, signaling a broadening in the economic recovery. How smooth the nationwide vaccination process goes, as well as the ultimate size and scope of the next fiscal relief package currently making its way through Congress, will of course affect how much momentum the economy can gain in early 2021.
Sources: Econoday, U.S. DoC, Gallup, FRBNY, FRBSL