Seasonally adjusted greetings to Annaly Salvos readers around the world!
In the commercial spirit of the season (and a day early for our blog post this week), we thought we’d go down a level from the headline retail sales numbers, which have been trending strongly of late. In November, retail sales rose 0.8%, and October and September were both revised upwards. Many economists are pointing to the relative strength of this three-month set to predict a decent 4th quarter GDP number. Macroeconomic Advisors has raised its estimate to over 3%. “The report on retail sales through November,” they write, “was much stronger than expected, and even with offsets to our assumptions for imports and inventories, we revised up our current-quarter tracking forecast of GDP growth by four tenths on this report.”
The results for selected line items were consistent with the theme that Americans are starting to spend a little bit more on things that fall more into the “discretionary spending” category, while cutting back on most purchases related to buying new houses. So to begin at the top, total retail sales (less food and autos) were approximately $338 billion at a seasonally adjusted rate in November, up 8.1% from a year ago and within shouting distance of the cyclical peak of $342 billion in November 2007. (All retail sales data are through November 2010.)
Sales at furniture and home furnishing stores, which rose along with the strong housing market, are still languishing below the cyclical peak and bumping along the cyclical trough.
Likewise, sales at electronic and appliance stores, which we would put in the same general “new home sales” category as furniture, are also skittering along the cyclical bottom.
In contrast, building materials, garden equipment and supply dealers, more reflective of the do-it-yourself category of housing-related consumption, are registering double-digit year-over-year sales growth. After the collapse in this category’s sales over the last two years, and with prospects for the housing market still weak, perhaps people have capitulated on maintenance and upgrades.
Recreational purchases are rising faster than the cohort. Sporting goods, hobby, book and music stores are rising impressively on a year-over-year basis, perhaps reflecting the trend towards staycations and the tentative beginnings of the resumption of discretionary spending.
Likewise for the “miscellaneous” category of retail sales, which encompasses stationery, gift, novelty, souvenir and used merchandise stores. They are rising at a double-digit year-over-year pace.
The lump of coal in the sales stockings is new home sales, which are still at generational lows after the mid-decade top. The population of the United States has about doubled since the 1960s, and yet new home sales are less than the run rate of that era. Moreover, it is the first time that new home sales have continued to decline after the official end of a recession. The question before the market is whether or not we can have a sustainable recovery without the important contribution of the housing sector.
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