Retail sales increased by 0.6 percent in December, wrapping up the crucial holiday shopping season for retailers on a modestly disappointing note, while undershooting expectations of a 0.7 percent increase. Dampening the negative disappointment, November retail sales were revised modestly upward to a 0.2 percent gain from the previously reported 0.1 percent.
Strong auto sales were a meaningful contributor to that top-line result, surging 2.4 percent in December and lifting their gain for the year to 7.2 percent. Excluding the strong auto sales results, core retail sales rose by a much more tepid 0.2 percent.
The December sales results once again illustrate the change in the buying habits of American consumers. Nonstore retail sales, which captures internet commerce, rose 1.3 percent for the month, as consumers increasingly turn to their smart phones and computers to shop online. That solid advance capped a year that saw gains of 13.2 percent for the channel.
Conversely, department stores struggled despite efforts to drive traffic, while electronics & appliance retailers felt the same pinch. Both saw sales decline 0.5 percent during the month. Recent announcements of another round of store closures by Macy’s and Sears reflect the structural changes in the way that people shop. Department store sales declined 8.4 percent in 2016, and there is little reason to expect that the trend toward online shopping will change any time soon.
Turning the page into 2017, the benefits of continued job gains and stronger wage growth over the next year are expected to be offset in part by rising inflationary pressure, which will confront consumers in the form of higher prices for a wide range of goods and services. Nonetheless, the fuel provided by stronger take-home pay coupled with surging consumer sentiment should continue to serve as a solid support for spending activity and the economy in 2017.