U.S. Retail Sales, Economic Confidence Strengthen

Retail sales enjoyed strong end-of-year gains, with e-commerce growing at a rapid rate.  In total, retail sales in brick and mortar stores rose 3.1 percent year-over-year in December, according to a new study by the National Retail Federation.

Retail sales enjoyed strong end-of-year gains, with e-commerce growing at a rapid rate.  In total, retail sales in brick and mortar stores rose 3.1 percent year-over-year in December, according to a new study by the National Retail Federation.

In total, Americans spent $626.1 billion in the holiday season, representing a 3.7 percent increase on a year-over-year basis when including online sales. In a separate report by Adobe, a marketing services firm, e-commerce sales rose 12.7 percent on a year-over-year basis during the holiday period to reach $83 billion, a higher rate of growth than in 2014, when e-commerce sales rose 12 percent during the holiday season.

NRF Chief Economist Jack Kleinhenz noted the growth came against two major headwinds: deflation and unseasonable weather, which have impacted retail spending in the first quarter of the last three years, but also impacted some parts of America in December. “A double whammy of deflation and December weather constricted holiday sales growth as well as consumer spending,” Kleinhenz said in a statement.

He also noted that retailers could expect some macroeconomic strength to boost sales. “While the timing is uncertain there are positive prospects for improvement, including recent job gains that will help lift income and earnings, and a healthy housing market that should provide some support for spending in various retail sectors,” he said.

According to NRF President and CEO Matthew Shay, retailers faced considerable pressure from several fronts, but managed to see revenue growth nonetheless.

“Weather, inventory challenges, advances in consumer technology and the deep discounts that started earlier in the season and that have carried into January presented stiff headwinds as retailers competed with one another and their own bottom line,” he said.

Shay added, “Despite these factors, the industry rallied, consumers responded, and sales still grew at a healthy rate, which is a huge testament to the resilience, knowledge and expertise of our retail leadership.”

Meanwhile, a recent Gallup poll has economic confidence rising to -7 from -12, reaching the highest reading from this report since June 2015. The weekly U.S. Economic Confidence survey, which has remained negative since April 2015, has shown uneven but gradual signs of improvement. Some economists worry a drag on the “wealth effect”, from a declining stock market may drag consumer confidence own, and spending down with it, in the coming weeks.

The weakness in American equity markets, while moderate when compared to steep declines abroad, has caused growing concern among investment bankers and economic analysts. The S&P 500 closed down nearly 8 percent on Tuesday, in which it barely eked out a gain. Seven of the 11 trading days of 2016 have so far ended in a loss for the S&P 500.