Chief Economist Scott Brown discusses current economic conditions.

The holiday shopping season is critical for most retailers. For some, the season is make or break for the whole year. The November retail sales report was weaker than expected, although amplified by the seasonal adjustment. No surprise, consumers are increasingly shopping online. The pandemic has reduced the seasonal traffic at the brick-and-mortar stores. Seasonal adjustment issues are also evident in other areas, such as manufacturing and construction. In turn, much of the recent noise may see a reverse echo in January and February.

Retail sales fell 1.1% in November (+4.1% y/y). Motor vehicle sales fell 1.7% (+6.0% y/y), but fell 9.8% prior to seasonal adjustment (vs. -2.6% in November 2019). Sales at clothing stores fell 6.8% (up 4.8% before seasonal adjustment, compared to +17.7% in November 2019). Department store sales fell 7.7% (up +14.7% before adjustment, compared to +28.2% in November 2019). People have been shopping for Christmas, just not as much as usual. Is online shopping making up the difference? Sales at non-store retailers (including mail order and internet) edged up just 0.2% in November, but were up 13.9% before adjustment (up 29.3% y/y, compared to +8.9% y/y in November 2019). The pandemic accelerated two retail trends that have been apparent in recent years: the rise of internet shopping and ongoing weakness in brick-and-mortar retailing.

Scott Brown
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Motor vehicle production exhibits a strong seasonal pattern. Output falls sharply each July, due to the summer factory retooling shutdowns (a few decades ago, these were spread out over the summer, but they have become increasingly concentrated in the first week in July). Output also dips in November and December, reflecting the holidays. Motor vehicle output rose 5.3% in November, but was down 6.2% before seasonal adjustment. Vehicle production was unchanged from a year earlier. Note that while consumer demand for vehicles has been strong, business demand (including car rental agencies) has remained soft.