Retail sales decline 0.6% mom in November

Retail sales fell 0.6% in October-November after rising sharply by 1.3% in the previous month, the government said on Thursday. Sales declined at furniture, electronics, and home and garden stores.

Americans’ spending has been stable since inflation first spiked nearly 18 months ago, but Americans’ ability to continue spending during a period of high inflation may be weakening. Inflation has retreated from a four-decade high reached this summer, but remains high enough to erode Americans’ spending power. Prices rose 7.1% year-on-year in November.

“The weakness in sales…suggests that higher borrowing costs, slower job growth and an unusually low savings rate are now catching up with consumers,” said Andrew Hunter, chief US economist at Capital Economics.

Consumer spending should still grow at a solid pace for the last three months of the year, Hunter said, but he expects a sharp slowdown early next year.

Monthly sales data can be volatile and a negative report is often followed by a rebound, other economists said.

Sales fell 2.3% at auto dealerships, 0.6% at sporting goods stores and 0.1% at convenience stores, a category that includes big chains like Walmart and Target. Sales in online and catalog stores fell by 0.9%.

The precipitous 2.5% decline in sales at Home & Garden stores likely reflects the sharp drop in home sales due to rapid US interest rate hikes, which have pushed homes out of reach for more and more Americans.

Solid hiring, rising wages and improved savings from government financial assistance during the pandemic have allowed most Americans to keep up with soaring prices. But many are now digging into their savings to keep up spending levels. The savings rate fell to the second-lowest on record in October.

Americans are also putting more purchases on their credit cards. According to the Federal Reserve Bank of New York, total credit card debt rose 15% in the July-September quarter, the largest increase in 20 years.

Eric Cruz, who shopped at a Walmart in New Jersey, said he plans to cut his holiday shopping budget by about 20% to about $800 this year. The 33-year-old Jersey City entrepreneur said rising utility and rent costs are now taking up a bigger chunk of his income. He tries to offset the rising costs by looking for credit cards with higher rewards, e.g. B. 5% discount on expenses.

“I’m looking for extra incentives, and credit cards allow me to do that,” he said.

Symptoms of economic stress are beginning to show, retailers have noted.

Craft supply chain Jo-Ann Stores this week announced a pause in quarterly dividends for investors after comparable store sales fell 8% in the most recent quarter ended October.

“Budget-conscious consumers have been under sustained stress for many months and are becoming increasingly choosy,” said CEO Wade Miquelon.

However, Miquelon said inflation is declining even as the US may head for “something more typical of a recessionary environment in the short term.”

Overstock, the online retailer that sells a lot of furniture, began promoting holiday items to lure cautious shoppers back in October this year, CEO Jonathan Johnson said.

“Everyone competes for wallet share by offering the best deals they can,” Johnson said. “Customers continue to try to stretch their dollars as much as possible.”

Black Friday weekend, which ushers in the holiday shopping season, has been strong this year, said Sonia Lapinsky, managing director of retail practice at consultancy AlixPartners.

Still, Lapinsky noted, people are buying less overall as almost everything is more expensive than last year.

“Inflation will continue to put pressure on wallets,” Lapinsky said. “I think consumers will pull out.”

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D’Innocenzio reported from New York.

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