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Retail Sales Sag in November

12/15/2021

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By Scott McIntyre

Headline retail sales rose by just +0.3% last month, well short of the +0.8% median forecast and significantly below the +1.8% revised October reading.  The retail sales “control group,” a proxy for the consumption component of GDP, was expected to increase by +0.8%, but it actually fell -0.1%.  What’s even more surprising is that the report isn’t adjusted for inflation, so oversized increases at gasoline station and eating and drinking establishments actually pushed overall sales volume higher.  Outside of these categories, November spending dropped significantly at electronics stores (-4.6%), department stores (-5.4%) and general merchandise stores (-1.2%).  Even sales at non-store retailers (e-commerce) was flat.

On the surface, it was a disappointing report.  However, like most economic releases over the past year-and-a-half, it contained considerable noise.  Seasonal adjustments probably distorted both October and November as adjustments consider historical patterns that aren’t nearly as relevant during a pandemic.  It's also very likely that the report reflected consumers starting their holiday shopping much earlier this year with the expectation that store supplies would be leaner than in past years.  These two factors combined to give a boost to October, while draining November.  On a three-month annualized basis, spending appeared healthier, up +9.3%, while on a year-over-year basis, the volume of overall sales was up +19.5%.

The Fed will conclude its final FOMC meeting of the year this afternoon and is widely expected to announce a doubling of their taper pace.  If this proves to be the case, new QE asset purchases would reach zero by March.  The market fully expects this to happen.  The bigger question is when will Fed officials begin raising the overnight funds target rate off zero?  We know this won’t happen until the taper is complete, but the timing of the liftoff is unknown.  FOMC members will consider this morning’s retail sales report, but it’s very unlikely to alter the expected taper plan.  However, the slowdown in headline spending along with the uncertainty of the emerging Omicron variant, should give Fed officials reason to proceed with caution.

 

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The paper/commentary was prepared by Hilltop Securities Asset Management (HSAM). It is intended for informational purposes only and does not constitute legal or investment advice, nor is it an offer or a solicitation of an offer to buy or sell any investment or other specific product. Information provided in this paper was obtained from sources that are believed to be reliable; however, it is not guaranteed to be correct, complete, or current, and is not intended to imply or establish standards of care applicable to any attorney or advisor in any particular circumstances. The statements within constitute the views of HTS and/or HSAM as of the date of the document and may differ from the views of other divisions/departments of affiliates Hilltop Securities Inc. In addition, the views are subject to change without notice. This paper represents historical information only and is not an indication of future performance. Sources available upon request.

Hilltop Securities Asset Management is an SEC-registered investment advisor. Hilltop Securities Inc. is a registered broker-dealer, registered investment adviser and municipal advisor firm that does not provide tax or legal advice. HTS and HSAM are wholly owned subsidiaries of Hilltop Holdings, Inc. (NYSE: HTH) located at 717 N. Harwood St., Suite 3400, Dallas, Texas 75201, (214) 859-1800, 833-4HILLTOP. © 2021 Hilltop Securities Inc. | All rights reserved | MEMBER: NYSE/FINRA/SIPC

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