Retail sales grew 0.3% in November, lower than expected

Retail Sales

You’d think that heading into the Holiday season, economic activity should be picking up. To an extent, that’s been the case. However, some economists are worried that whatever seasonal growth we’ve seen so far has been far less than originally expected. That seems to be the case with today’s retail sales figures, which were lower than expected. The Commerce Department reported that sales across the retail sector increased by just 0.3% compared to the previous month.

While it’s still good news that sales are growing, that’s much less than the previous month. Between September and October, sales increased by a whole 1.8% or six times more than the increase seen between October and November. Typically, retail sales spike during November and December in anticipation of Christmas. However, that doesn’t seem to be happening much right now.

If you look at the weakness in November sales, it looks more related to holiday shopping. Some of that is going to be a reflection of prices, but the bigger story here is the change in the seasonal pattern,” said Aditya Bhave, an economist for Bank of America, in response to the news.

Certain sectors in the retail industry even saw losses last month. Electronics sales were down around 4.6% in November compared to October, while sales at general merchandise stores fell by 1.2%. In contrast, spending at non-physical retailers, such as online stores, stayed more or less the same. Gas stations sales were up 1.7% last month, as well as up more than 52% from last year thanks to these record-high gas prices.

It’s also worth mentioning that these retail sales figures aren’t adjusted for inflation. Therefore, this current high-inflation environment is part of the reason why sales numbers seem higher now. If they were adjusted for inflation, retail sales would be significantly lower than they were last month.

Looking at the entire situation, there are a few reasons why retail spending hasn’t increased as much as anticipated. The first issue is inflation, with many Americans now worried about this monetary situation. While the Fed is gearing up to curtail asset purchases and raise interest rates again, most economists think it’s already far too late to stop inflation from rising at least a bit more.

Additionally, supply chains issues are also hurting the retail sector. With fewer goods available for sale on shelves, that’s led to a corresponding decrease in retail activity, even if that’s a relatively slight decrease. American store shelves aren’t necessarily empty as they were when the pandemic first began, but supply bottlenecks are still an ongoing problem that likely won’t be resolved soon.

It’s also true that Omicron fears will likely further hurt retail sales going forward. Originally dismissed by investors as an overreaction, the continued spread of the new variant is starting to make the markets a little jittery. Investors are also worried whether Omicron could lead to further exacerbated inflation and supply chain problems, especially if lockdowns become needed again. Despite the proliferation of vaccines, lockdown fears still are a major concern, especially for the more bearish traders in the market.