People carry shopping bags as they visit a department store during the holiday season in New York City.
Eduardo Munoz | Reuters
Retailers chalked up solid gains in the final month to wrap up the holiday season, according to the CNBC/NRF Retail Monitor for December.
However, the data also shows the true state of consumer spending is now clouded by a new factor: deflation.
The Retail Monitor, which excludes autos and gas, rose 0.4% in December, down from a gain of 0.8% in November, when the holiday shopping season traditionally kicks off. It’s just below the long-run average of 0.6%.
The core retail gauge, which also takes out restaurants, climbed a more modest 0.2% after gaining 0.7% in the prior month. For the year, the Retail Monitor increased by 3.1% and the core was up 2.4%.
Some give back from the strong November was inevitable, and economists expect the economy to cool from the outsized growth in the third quarter. One question is whether December marks the beginning of a long-predicted normalization in consumer spending.
Spending was clearly hampered by the slowdown in the housing industry. Three of the biggest negative categories were housing related:
- Electronics and appliances (-3.2%)
- Building and garden supplies (-1.5%)
- Furniture and home furnishings (-0.9%).
Furniture sales have been negative in four of the past five months.
Traditional holiday-related retail categories did better, including a 0.9% gain in general merchandise stores and a 2.6% increase in nonstore retailers, which incorporates internet sales. Restaurants and bars posted a 1.5% rise, it’s best showing since July.
Deflation
Deflation is another factor. Goods prices, less food and energy, have fallen for six straight months. They are down 3.7% at an annualized rate from June through November.
The Retail Monitor found sales of clothing and accessories down 0.4% but the November CPI showed prices fell a much larger 1.3%. The December…
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