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Economy in Brief

The Dismal Christmas: U.S. Retail Sales Fell Sharply
by Tom Moeller January 14, 2009

Retail sales in December fell for the sixth consecutive month. Worse yet, the 9.8% year-to-year decline was a postwar record. The 2.7% drop last month followed declines of 2.1% and 3.4% during November and October which were greater than reported initially. Consensus expectations had been for a December sales decline of 1.2%. The retail sales data are available in Haver's USECON database.

Again in December, lower vehicle sales and lower gasoline prices accounted for much of the overall decline in sales. However, even excluding these two areas, sales fell 1.5% and the 0.2% November decline was downwardly revised from the initial report of a slight uptick. Year-to-year, excluding autos and gasoline, sales fell 2.2% which also was a record.

Motor vehicle & parts sales slipped just 0.7% last month but they have declined in all but one month since last November. Year-to-year, dollar sales are down by one quarter. However, that decline is less than the more than one third y/y drop in unit sales of motor vehicles.

Lower prices continued to pull sales at gasoline service stations lower. Last month they fell 15.9% (-35.5% y/y) after like declines during the prior two months. That momentum stalled this month as gasoline prices have ticked slightly higher versus the December average.

Hard-good sales were notably lower during December. Sales at furniture and electronics & appliance stores took a 1.4% (-8.8% y/y) slide and the 0.4% November uptick was significantly lowered. Furniture store sales fell 1.8% (-13.2% y/y) for their seventh consecutive monthly decline. Sales of electronics & appliances fell 1.0% (-4.2% y/y) after a downwardly revised 1.5% November increase.

In the soft goods area, apparel store sales dropped 2.5% for their fourth sharp monthly decline in the last five months. At general merchandise stores, the news wasn't much better as sales fell 1.3%; however, they posted a year-to-year decline of -0.4%.

Dining out became another casualty of the current recession. Restaurant & drinking place sales fell 2.2% last month and the y/y decline of 0.5% compares to 5.2% growth during 2007. For all of 2008, restaurant sales rose a modest 3.5%.

Building materials sales continue to tumble with the drop off in housing. The 2.9% December drop was similar in size to the declines of the prior two months and it was the fifth consecutive large monthly shortfall.

Sales at nonstore (internet) retailers also have been hit hard. The 1.9% decline last month (-5.3% y/y) was the sixth in a row.

The Mismeasured Personal Saving Rate Is Still Useful: Using Real-Time Data to Improve Forecasting from the Federal Reserve Bank of Philadelphia can be found here.

Commitment Versus Discretion in Monetary Policy, also from the Federal Reserve Bank of Philadelphia, is available here.

  December November October Y/Y 2008 2007 2006
Retail Sales & Food Services (%) -2.7 -2.1 -3.4 -9.8 -0.4 4.2 5.8
  Excluding Autos -3.1 -2.5 -2.9 -6.7 2.7 4.6 6.8
    Less Gasoline -1.5 -0.2 -1.2 -2.2 1.8 4.2 6.2
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