“Not seasonally adjusted” retail sales spiked to a record. “Seasonally adjusted” retail sales fell. Both: +16.9% from year ago. What the heck is going on?
By Wolf Richter for WOLF STREET.
What was in the headlines all over the place is that retail sales in December, including at restaurants and bars, fell 1.9% from November, seasonally adjusted.
What wasn’t in the headlines is that this was up by 16.9% from December a year earlier, which is a huge gigantic jump in sales.
And what wasn’t in the headlines either is that “not seasonally adjusted,” retail sales spiked by 10% from November to a new blistering record of $715 billion, also up 16.9% from a year ago, according to the Census Bureau today (red = seasonally adjusted; purple = not seasonally adjusted):
I see three major complexities in our understanding of today’s retail sales:
- Rampant inflation that increases sales in dollars. In the biggest retail category, auto dealers, accounting for 20% of total retail sales, prices exploded
- Shortages in a few areas, including the biggie, at new vehicle dealers;
- Seasonal adjustments when the pandemic has upended seasonality. Adjusting for this seasonality-gone-rogue is a tricky affair. In late 2021, a complication to seasonality was that people front-loaded their shopping to outrun the expected shortages in December.
But retail sales are so brutally seasonal that not-seasonally-adjusted sales give you whiplash. So I’ll stick to seasonally adjusted retail sales. One exception: nonstore retailers (mostly ecommerce) where not-seasonally-adjusted sales spiked to a huge record, but seasonally adjusted sales plunged. I’ll show both, and you can decide what the heck that was all about.
Retail sales are sales of goods at brick-and-mortar stores and online. Sales of services, such as insurance, healthcare, or haircuts are not included.
That enormous 16.9% year-over-year spike in retail sales in December is a product of huge sales gains during the year, goosed by stimulus money and $4.7 trillion in money-printing since March 2020, by interest rate repression leading to a boom in mortgage cash-out refis that then gets spent, by soaring prices of stocks and cryptos, and by raging inflation as the purchasing power of the dollar goes WHOOSH!
Size of each retailer category by sales volume. Auto dealers and parts stores are the largest retail segment (black line); followed by nonstore retailers, mostly ecommerce, 16% of total retail sales (red); followed by grocery & beverage stores, restaurants and bars, general merchandise stores, building material and garden supply stores, and all the rest, with department stores near the very bottom:
Exploding prices in the biggest retail category hide the decline in unit sales.
New & used auto dealers and parts stores: Seasonally adjusted sales, measured in dollars, dipped 0.4% in December from November, to $126 billion, but were still up by 10.2% from December 2020, and by 20.4% from December 2019, driven by ridiculous price increases in used and new vehicles, and by a systematic prioritization of higher-dollar models:
But the number of new vehicles delivered to end users plunged in December 2021 by 24% from December 2020 and by 26% from December 2019, to a seasonally adjusted annual rate of 12.4 million vehicles, amid widespread shortages and mind-boggling above-MSRP prices at new-vehicle dealers.
The Average Transaction Price of new vehicles spiked 20% year-over-year to $45,753 in December, according to J.D. Power estimates, driven by ridiculous price increases and the shift to high-dollar models:
The number of used vehicles sold at dealers in December was flat with November but down 5.5% from December 2020. Inventory is now piling up. At the end of December, supply was 20% above average. Potential buyers have finally gotten spooked by these ridiculous prices. But these ridiculous price increases – the CPI for used cars and trucks spiked 37% year-over-year – whipped up the retail dollar-sales at used-vehicle dealers
The other retail categories in order of sales volume.
Ecommerce and other “nonstore retailers”: This is where seasonal adjustments play a huge role. “Nonstore” includes online-only retailers and the online sales of brick-and-mortar retailers, as well as sales by mail-order houses, street stalls, vending machines, etc.
- Not seasonally adjusted, sales spiked by 11.4% in December from November, and by 9.7% year-over-year to a new record of $115 billion (purple line).
- Seasonally adjusted, sales plunged 8.7% in December from November, but still jumped by 10.7% year-over-year (red line):
Food and Beverage Stores: sales dipped 0.5% for the month, seasonally adjusted, to $77 billion. This dip occurred even as the CPI for food-at-home rose by 0.4% for the month. Year-over-year, sales jumped by 8.4%, as the CPI for food-at-home jumped by 6.5%:
Food services and drinking places: Sales dipped 0.8% for the month from the record in November, to $73 billion (seasonally adjusted), up 41% from December 2020, and up 12% from December 2019 – amid big price increases: the CPI for food-away-from-home jumped by 0.6% for the month and by 6.0% year-over-year:
General merchandise stores: Sales dipped 0.5% for the month to $59 billion, seasonally adjusted, for a year-over-year jump of 13.3%, and up 21% from December 2019. Walmart and Costco are in this category, but it does not include department stores.
Gas stations: Sales ticked down 0.7% for the month, from an all-time record, to $55 billion (seasonally adjusted), pushed down by price declines of 0.5% in December from November.
But year-over-year, sales spiked by 41%, powered by huge price increases: CPI motor fuel spiked by 49.5% year-over-year.
Building materials, garden supply and equipment stores: Sales rose 0.9% for the month, 12.5% year-over-year, and 27% over two years, to $42 billion. Note the stimulus-fueled DIY-spike in March that is now ancient history:
Clothing and accessory stores: Sales dropped 3.1% for the month, to $26 billion, but were still up nearly 30% year-over-year, and up by 15% from two years ago:
Miscellaneous store retailers, including cannabis stores: Sales jumped 1.8% for the month, to a record of $15.3 billion (seasonally adjusted), and by 21% from a year ago, and by 33% from two years ago. This category of specialty stores includes most prominently cannabis retailers, but also stores that sell beer brewing supplies, telescopes, art supplies, etc.
Department stores: sales plunged 7.0% for the month, after having already plunged in November, to $10.7 billion (seasonally adjusted). Compared to December 2020, sales were up 22%, but compared to December 2019, sales were down 0.7%, as the demise of this way of shopping, after a brief respite in mid-2021, continues. Sales are down 45% from the peak in the year 2000. For what it’s worth, Macy’s just released another list of department stores that it will close in 2022.
Furniture and home furnishing stores: Sales plunged 5.5% for the month, to $11.8 billion (seasonally adjusted), but were still up 11% year-over-year, and by 20% over two years:
Sporting goods, hobby, book and music stores: Sales dropped 4.3% for the month, to $9.1 billion (seasonally adjusted), but were still up 18% year-over-year, and 38% over two years:
Electronics and appliance stores: Sales dropped 2.6% for the month, after the plunge in November, to $7.4 billion, a pre-pandemic low going back decades. While they were still up 15% from December 2020, they were down 8% from December 2019.
This category includes only brick-and-mortar specialty electronics and appliance stores, such as the brick-and-mortar stores of BestBuy. Electronics and appliances, a vast industry, are now mostly sold online and at brick-and-mortar general merchandise stores (i.e., Walmart) and home improvement stores (i.e. Home Depot) that are not included in this category:
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