December Retail Sales, January UI Claims

Spending Sputters, Claims Climb, the Parade of Good Data Pauses

  • Retail Sales for December increased by a weak 0.1 percent. November was revised up to 0.4 percent.
  • December Ex-auto Retail Sales decreased by 0.2 percent. Motor Vehicle sales gained 1.5 percent.
  • Initial Claims for Unemployment Insurance increased by 24,000 for the week ending January 7.

When things can’t last forever, they don’t. Today we see the end, at least temporarily, of the string of better-than-expected economic data that began in late 2011. Retail spending gained a weak 0.1 percent in December. This disappointing data point was somewhat counterbalanced by an upward revision to November retail sales which now shows a 0.4 percent increase, above the previously reported 0.2 percent gain. Unit auto sales in December were solid, registering a 13.5 million unit pace. Retail sales of autos gained 1.5 percent. Non-auto retail sales declined by 0.2 percent in December, dragged down by falling gasoline prices and also by the “Apple Effect.” Gasoline station sales dipped by 1.6 percent in December. Electronics and appliance store sales sunk by 3.9 percent in December, perhaps representing a trough in demand after the launch of Apple’s iPhone 4S in October. In October electronics store sales gained a strong 2.4 percent. Beyond autos, the December data shows some more positives. Furniture sales were up 1.0 percent. Building materials gained 1.6 percent. Clothing stores gained 0.7 percent. Overall, it is a mixed retail sales report with as much good news as bad. With gasoline prices rising in January and some balancing out of electronics and appliance sales, there is reason to expect that we will be back on track for a moderate gain to retail sales for the start of 2012. Also, keep in mind that the “Superbowl Effect” is just around the corner. Television sales may take up the slack, especially if the teams playing represent popular markets. The mixed December retail sales data is a reminder that consumers cannot, by themselves, lead the economic expansion. Ongoing job creation, accompanied by gains in real disposable income, is necessary to keep the drive alive.

As if on cue, initial claims for unemployment insurance unexpectedly jumped by 24,000, back to 399,000 for the week ending January 7. Claims data around the winter holidays can get squirrelly, so one data point does not make a trend. The largest increases in initial claims for the week came from Michigan and Wisconsin, which points to something happening in durable goods manufacturing, which may prove to be a temporary statistical glitch.

Market Reaction: Equity markets opened with gains. Treasury yields are down at the long end. Oil is up to $101.86/barrel. The dollar is down against the yen and the euro.

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