This would be good news for those who thought that what little economic momentum there is would sustain itself through the holidays, but I think it’s also an example of “Be careful what you wish for.”
Holiday shoppers were more than willing to spend during the holiday season, if they saw big discounts or were shopping online.
Sales rose 3.8 percent from last year for November and December combined, according to the National Retail Federation’s analysis of federal figures. That was a healthy gain in a season that kept merchants worried right up until Christmas as people held off on spending.
That caution and increased online shopping made the holiday less festive at the mall. Shoppers stayed away from many traditional destinations like department stores and electronics stores.
The sales increase came in just shy of the trade group’s forecast of a 3.9 percent gain. It was better than the 3.5 percent increase in 2012 and the 3.3 percent average for the past 10 years.
This probably means that fourth quarter GDP will, contrary to what I feared, come in half-decent at 3 percent or so.
But the AP writeup notes the clouds on the horizon, and they are significant. First, the sales increase wasn’t particularly profitable, and second, the first quarter has gotten out of the gate pretty slowly:
… For retailers, those discounts came straight out of their profits. Many have cut their forecasts for the fourth quarter, and profits are expected to be the weakest since second quarter of 2009, when the economy was coming out of the Great Recession.
(President of Retail Metrics LLC Ken) Perkins estimates that fourth-quarter profits will fall 0.7 percent from last year, the first decline since a 6.7 percent drop seen during the second quarter of 2009, according to his tally of 120 retailers.
January is already off to a slow start. Some stores like Express Inc. and Lululemon Athleta have said weak January sales are compounding their holiday-season woes. Express said it plans to continue heavy sales promotions, which it expects to last through the month.
Finally, for those who think 2013 was some kind of turnaround year — Nope:
For all of 2013, total retail sales rose 4.2 percent, the weakest gain in four years.
AP’s coverage of retail sales failed to note that October and November were both revised downward. The figures for the final three months are 0.5%, 0.4%, and 0.2%, respectively.
Then of course there’s the great unknown, which the administration managed to push mostly into 2014: Obamacare. How much damage will the additional costs and rampant confusion inflict? I would say, “A lot more than zero.”
UPDATE: Zero Hedge notes that “the data involving Electronics and Appliance Stores … posted the biggest 2 month drop in 2 years!”