Consumer Spending Solid at End of Holiday Shopping Season
December retail sales, a measure of purchases at stores, restaurants and online, increased a seasonally adjusted 0.3% from a month earlier, the Commerce Department said Thursday.
Solid gains in nearly every category offset a drop in motor-vehicle sales, the data showed. The final month of the holiday season is key for retail businesses, especially for department stores, clothing outlets and online sellers.
Excluding the volatile categories of autos and gas, retail sales rose 0.5% in December, the strongest pace of growth in five months.
Still, updated numbers from Commerce showed retail sales outside of motor vehicles and gasoline declined in the prior three months. (…)
The National Retail Federation said on Thursday that retail sales for the November-December period, excluding automobiles, gas and restaurants, increased 4.1% to $730.2 billion, compared with the same period last year. That is at the higher end of the trade group’s expectation of 3.8% to 4.2% growth. (…)
After the report, data firm IHS Markit lowered its tracking estimate of fourth-quarter gross-domestic-product growth by 0.3 percentage point to 2.3%, citing softness in core retail sales. It lowered it further to 2.2% after weak data on retail inventories later in the day. (…)
Good thing December was good because, in total, the 2019 holidays season was pretty soft. Control sales, which exclude car-related spending, building materials and restaurants and bars, and which feed directly into GDP, were up only 0.45% QoQ in Q4, a 1.8% annualized rate, down from +1.3% (including January), or 5.1% a.r. in 2018 and +1.8% (+7.5% a.r) in 2017.
Quarterly sales were actually down 0.1% over Q3, while still up 4.1% YoY thanks to the very bad December in 2018.
The fact is that growth in payrolls (employment x hours x wages) is slowing steadily from a January peak of +5.7% to +3.8% in December
Here’s the main rub: real monthly payrolls growth has decelerated sharply throughout 2019 and ended the year at +1.6% YoY with inflation at +2.3%.
It is difficult to expect employment growth to accelerate from +1.4% YoY in December given the near-full employment state of the economy and the now negative growth growth rate in the U.S. working age population.
Average hours worked could recover but not enough to matter much. That leaves wages, and credit, as the hoped for growth re-accelerator for retail sales. Two charts paint that picture:
US housing starts jump in December to highest in 13 years ‘Warmer-than-usual’ temperatures may have helped activity, economists say
China’s Economic Growth Slows to Near 30-Year Low Chinese economic growth slowed to 6.1% last year, as sagging trade and business confidence pulled the closely watched reading to its lowest level in nearly three decades.
Even so, the growth rate of 6.1%, down from a revised 6.6% rate for 2018, fell within the government’s target of 6% to 6.5% for 2019. China’s official statistics bureau described the national economy as being “generally stable” last year. The economy grew 6% in the fourth quarter. (…)
Incomes grew more slowly than the economy did last year, 5.8%, while rising inflation—made worse by higher pork prices—crimped purchasing power. (…)
In December, value-added industrial output in China rose 6.9% from a year earlier, accelerating from 6.2% in the previous month. (…)
Retail sales climbed 8% in December from a year earlier, compared with November’s 8% increase; that topped the Journal poll’s median forecast for 7.8% growth.
Fixed-asset investment in China’s urban areas, meanwhile, rose 5.4% for the full year of 2019 from a year earlier. Growth in closely watched construction activity exceeded the 5.2% increase recorded in the January-November period and surpassed the growth rate expected by polled economists. (…)
(…) If 2019 proved anything, it is that U.S. pressure alone—without the help of allies—can’t completely derail China’s economy. China’s export sector was already recovering before Wednesday’s trade truce, thanks to an uptick in the global electronics industry. The real impediments to growth lie within: in a rickety financial sector and statist leadership which remains wary of market-oriented reforms. (…)
Investment in computers and electronics manufacturing accelerated into December, bringing the full-year increase to 16.8%. Overall manufacturing and private-sector investment both picked up. And the long-suffering auto business grew at the fastest pace since June 2018. All told, labor-intensive light industry is clearly on an uptrend after a tough 2019, which is helping the job market heal.
(…) there are some tentative signs policy makers are acting to contain the risks in property. The central bank has been reluctant to allow another ramp-up in mortgage lending while housing prices were still bubbly. But data released Thursday showed a pickup in long-term bank lending to households in December, notes Capital Economics, which could be an early sign that regulators are easing up. (…)
Senate Passes USMCA, New North American Trade Pact Passage of the trade agreement that replaces Nafta marks a rare moment of bipartisan cooperation on Capitol Hill against the backdrop of President Trump’s impeachment.
EARNINGS WATCH
We have 44 reports in, a 70% beat rate with a +4.7% surprise factor. Actual earnings growth for the 44 reporters was +0.3% on a +3.8% revenue growth rate. During the Q3 earnings season, the first 43 reporters boasted an 86% beat rate, a +4.5% surprise factor and earnings down 0.4% and a 3.8% revenue growth rate.
Q4 earnings are now seen declining 0.8%, from –0.3% on Jan. 1 and +4.1% on Oct. 1. Q1’20 is now seen up 5.8% from +6.3% on Jan. 1 and +8.9% on Oct. 1.
Trailing EPS are now $163.15.
Treasury to Issue New 20-Year Bond in First Half of 2020 The U.S. government will begin issuing 20-year bonds in the first half of 2020, the Treasury Department said.
U.S. to Change How It Releases Economic Data Labor Department will no longer allow news organizations to transmit stories on the data at the same time it is released
Starting in March, the department said it would only distribute the data electronically on its website. The media currently gets an early peek at a range of reports on the economic data such as the employment report at a secure facility, so it can publish its own stories on the information via computer at the same time the economic indicators are released to the public. (…)
The official said the change would eliminate potential advantages media organizations and their clients may have over other members of the public, adding that the change implements a recommendation the department’s inspector general made in 2016, during the Obama administration. (…)
Under the new policy, credentialed members of the media will still be able to read reports in a secure room 30 minutes or 60 minutes before their release, but those journalists won’t have access to computers. (…)