The National Retail Federation on Thursday reported that 2018 holiday retail sales grew a lower-than-expected 2.9% over the previous year, hitting $707.5 billion. Those numbers, which are based on data from the U.S. Census Bureau, exclude automobile dealers, gas stations and restaurants and include sales from Nov. 1 through Dec. 31. The trade association had anticipated growth between 4.3% and 4.8%, according to a press release.
The report came the heels of the U.S. Census Bureau's December retail sales report, which was delayed by a month due to the government shutdown and found a 1.2% November-to-December drop, the largest since 2009. Excluding auto and fuel sales, retail sales fell 1.4% from November but rose 2.2% year over year, the government said.
The data comes as a "surprise and in a contradiction" to positive consumer spending trends, NRF Chief Economist Jack Kleinhenz said in a statement. “The combination of financial market volatility, the government shutdown and trade tensions created a trifecta of anxiety and uncertainty impacting spending and might also have misaligned the seasonal adjustment factors used in reporting data. This is an incomplete story and we will be in a better position to judge the reliability of the results when the government revises its 2018 data in the coming months.”
The Census Bureau's report has sparked skepticism from some analysts and trade associations but also a stark realization from others that the holiday season may not have been as great as previously thought.
According to a Wells Fargo note emailed to Retail Dive Thursday morning, analysts were cautious of the Bureau's retail sales data. "The weekly Redbook index for same-store sales was up more than 6% for every week in December," according to the note. "To put an exclamation point on that, the 9.3% year-over-year increase in same-store sales in the final week of 2018 was the biggest on records that date back to the mid-1990s. That looks at odds with control group sales falling 1.7% in December to end the year up only about 2.0%."
The weak numbers could be a result of consumer shifting more spending to November around Black Friday and cyber week, but there may be other issues at play regarding the shutdown, the analysts said. While they acknowledged declines across the board in all categories, they pushed back on the scope of e-commerce declines in the government report.
"This morning’s release suggests the economy entered 2019 with less momentum than we previously expected. However, with much of the release hard to square with other variables, we expect revisions may be in order, and are wary to believe consumer spending is collapsing," the Wells Fargo note also stated.
Moody's Investor Services, however, took the data to mean that December was a "big disappointment," but an outlier as opposed to a trend that signals slowing consumption.
"We believe the disappointing results were most likely triggered by the sharp equity market losses, interest rate uncertainties and the looming government shutdown, which spooked consumers," Moody's analysts said in a report published Thursday.
It should come as little surprise that department stores were among the weakest performers, considering the competition from off-price and online sales as well as lower traffic and tepid apparel demand. However, there have been signs of improvement, Moody's analysts said. They added that upcoming earnings releases from big players like Walmart, Home Depot and Lowes will "further gauge the overall strength of the retail sector and whether or not the December disappointment was limited in scope."