December 2017 Retail Sales

Retail sales added to economic output as 2017 came to a close according to the Census Bureau.  Spending totaled $495.4 billion in December, rising 0.4 percent.  Compared to a year earlier, retail sales improved 5.4 percent.  Additionally, November’s count was revised upward to 0.9 percent from the already impressive 0.8 percent jump in the initial release.

The changing nature of the American retail experience was evident in the report.  Nonstore retailers experienced 1.2 percent growth during the month and a 12.7 percent rise from a year earlier.  Unfortunately, department stores did not do as well.  They lost 1.1 percent in receipts for December and managed an increase of just 0.5 percent during the prior 12 months.

Atlas’ favorite component in the report did well also.  Revenues at food services and drinking places increased 0.7 percent in December.  This is an important indicator to us because it represents the most discretionary spending in the economy.  Eating away from one's abode can be easily substituted for meals at home if Americans lose optimism about their situation.  As we mentioned yesterday in the Consumer Price Index note, the cost of eating at restaurants has increased in each of the last six months.  However, these higher prices are not keeping Americans from spending money at their favorite eateries.

Retail sales are another anecdote showing the health of the economy.  This report represents roughly one-third of consumers spending, so its upward trend is encouraging.  Along with low unemployment and moderate inflation, this indicator suggests the economy is strong.  Additionally, there are no signs of a recession in the forward-looking indicators Atlas follows, so this virtuous period of the business cycle is unlikely to end soon.