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By Wolf Richter for WOLF STREET.
Retail sales jumped by 0.7% in November from October, to $720 billion, seasonally adjusted, and October was revised higher (blue in the chart below), and so we look at the 3-month average (red in the chart), which irons out the month-to-month squiggles and includes the revisions, and it jumped by 0.7% as well.
November’s sales increase and the three-month average sales increase annualized amount to +8.6%! And it wasn’t just November, or the past three months. The spending spree started in July.
Retail sales have sharply accelerated month-to-month, starting in July. It’s like someone turned on the spigot in July and forgot to turn if off:
- 6-month January-June total: -0.1%, for an annual pace of -0.2%.
- 5-month July-November total +3.2%, for an annual pace of +7.6%.
Our Drunken Sailors, as we lovingly and facetiously have come to call them, are in the mood to spend, empowered by wage increases that have been outrunning inflation for the past two years, and flush with cash in money market funds and CDs that is still earning over 4% in interest, and buoyed by massive gains in their stock holdings, cryptos, home prices, and whatever, while their credit burden is historically low and their credit largely in excellent condition, even on their credit cards except for a small subsegment of subprime-rated accounts.
Second wind for inflation? This is where consumer demand is coming from, people are out there buying, and they’re buying feverishly online, once again spending money left and right, especially on big ticket items, such as motor vehicles. And after two years of big price declines, prices of new and used vehicles are already rising again. And that’s bad news on the inflation front. The Fed needs to watch out here in order to not throw more fuel on this demand.
The wave of immigration contributes to demand growth. The US population has surged in 2022 and 2023 by 6 million people due to immigration, and in 2024 has continued to rise, according to the Congressional Budget Office, using ICE and Census data.
Most of the immigrants work as soon as they find work, and they spend money, though they’re generally not big spenders. And this spending by this large new population is contributing to this sharp increase in demand.
Retail sales by category.
The biggest drivers of this growth were the two biggest retailer categories: new and used vehicle sales and ecommerce, combined accounting for 36% of total retail sales.
We have already seen that new vehicle retail sales in November, in terms of the number of vehicles delivered to retail customers, jumped by 10% year-over-year.
New and used vehicle dealers and parts stores (#1 category, 19% of total retail):
- Sales: $141 billion
- From prior month: +2.6%
- From prior month, 3-month average: +1.7%
- Year-over-year: +6.5%
The spike in dollar-sales in 2021 and 2022 was caused by ridiculous price increases. Starting in mid-2022, prices dropped overall, with used vehicle prices plunging. These price declines caused the dollar-sales for those 18 months to flatten out, despite rising retail unit-sales.
But that’s now over – prices are rising again while unit-sales volume is surging:
Ecommerce and other “nonstore retailers” (#2 category, 17% of retail), includes ecommerce retailers, ecommerce operations of brick-and-mortar retailers, and stalls and markets:
- Sales: $127 billion
- From prior month: +1.8%
- From prior month, 3-month average: +1.4%
- Year-over-year: +9.8%
Food services and drinking places (#3 category, 13% of total retail), includes everything from cafeterias to restaurants and bars.
After a decline in early 2024, growth resumed:
- Sales: $97 billion
- From prior month: -0.4%
- From prior month, 3-month average: +0.4%
- Year-over-year: +1.9%
Food and Beverage Stores (12% of total retail). Prices per CPI for food at home exploded from 2020 to early 2023, which caused the spike in sales, then flattened out at high levels for a while, before starting to rise again:
- Sales: $84 billion
- From prior month: -0.2%
- From prior month, 3-month average: +0.2%
- Year-over-year: +1.8%
General merchandise stores, without department stores (9% of total retail), including retailers such as Walmart, which is also the largest grocer in the US.
- Sales: $65 billion
- From prior month: no change
- From prior month, 3-month average: +0.2%
- Year-over-year: +3.4%
Gas stations (7% of total retail sales). Dollar-sales at gas stations move in near-lockstep with the price of gasoline. The price of gasoline plunged starting in mid-2022 and has continued to trend lower. These price declines push down dollar-sales at gas stations. Sales at gas stations also include all the other merchandise gas stations sell.
- Sales: $52 billion
- From prior month: +0.1%
- From prior month, 3-month average: -0.4%
- Year-over-year: -3.9%
Sales in billions of dollars at gas stations (red, left axis); and the CPI for gasoline (blue, right axis):
Building materials, garden supply and equipment stores (6% of total retail). The pandemic remodeling boom petered out in late 2022, and sales fell for a while. Starting in June this year, sales began rising again, though they remain well below the peak of the pandemic boom:
- Sales: $42 billion
- From prior month: +0.4%
- From prior month, 3-month average: +0.8%
- Year-over-year: +5.8%
Health and personal care stores (5% of total retail). Note the sharp drop in early 2024, but in May, sales began to recover:
- Sales: $38 billion
- From prior month: unchanged
- From prior month, 3-month average: +0.3%
- Year-over-year: +2.9%
Clothing and accessory stores (3.7% of retail):
- Sales: $26 billion
- From prior month: -0.2%
- From prior month, 3-month average: +0.3%
- Year-over-year: +2.2%
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The post The Fed Needs to Watch Out to Not Throw More Fuel on this Demand: Retail Sales Accelerated Sharply in the 2nd Half appeared first on Energy News Beat.
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