Nov. Retail Sales Slump 0.6% on Weak Demand for Cars, Electronics, Furniture

Weak demand for big-ticket discretionary items led to the biggest retail sales decline in a year.

According to the latest data from the Department of Commerce for November, total retail sales — which account for three-quarters of the U.S. economy — fell 0.6% last month, following a 1.3% advance posted in October.

While demand for essential items, including health and personal care as well as food and beverages stores, rose 0.7% and 0.8%, respectively, they were far outweighed by the list of slumping seasonal stalwarts that declined at their most important time of the year.

Notable decliners for November — which include the traditional Black Friday/Cyber Monday events as well as an unprecedented array of early and aggressive retail sales and promotions — saw outsized weakness as reflected by a 2.9% drop at department stores, a 2.6% slump at both car dealers and furniture retailers, a 2.5% decline in building materials and garden, and a 1.5% retreat in purchasing of electronics and appliances. At the same time, non-store retail, or eCommerce, delivered a 0.9% drop for the month versus October.

While the new data was far weaker than the average expectation of Wall Street economists, the retail retreat was consistent with PYMNTS research from a survey of over 13,000 consumers that showed personal worries about prices differ widely from what government policymakers are saying.

Although the latest inflation report dipped to an 11-month low of 7.1% earlier this week, the retail sales report showed that consumers’ spending habits remain cautious and geared toward essential items, while clearly lagging behind the official government reports.

“Consumers think it will take another 19 months — until roughly June 2024 — for inflation to return to the Fed’s 2% target,” the PYMNTS report noted.

Said another way, while official government data reflects a moderation of inflation, PYMNTS consumer research shows steady pessimism on the pricing front for another 19 months.

In short, until that personal outlook syncs up with the monthly reports, consumer spending and decision making will continue to be skewed toward essentials and away from discretionary spending, especially on big-ticket items.

The Restaurant Wrinkle

One area of note and much commentary involves the strength reported by restaurants — or food service and drinking places if you use the parlance of the Commerce Department — which delivered a 0.9% monthly increase in an otherwise weak period, not only outpacing all 15 other categories measured, but even topping the 0.8% advance posted by grocery stores.

Again, PYMNTS consumer research tries to explain why this is happening, at a time when the official CPI data showed restaurant food prices up 8%, while the cost of groceries rose 12%.

“When looking strictly at government data, one might assume that eating out is more financially compelling than buying groceries and cooking food at home when compared to 2021,” the study found. “However, according to PYMNTS data, three-quarters of consumers say they are eating at home more often than they once did, and more than a third are switching to cheaper restaurants when they do eat out.”

10 Days to Go

To be sure, the response from retailers — especially the large multinational brands — has been early and unequivocal, with cautionary words concerning excess inventory and the need to be aggressive on sales dating back to the spring.

While retailers’ inventory woes were initially worsened by the spike in gasoline prices brought on by Russia’s attack on Ukraine, fuel prices ultimately peaked in June and have been trending down for six months, whereas consumer confidence and household spending have not fully reflected the removal of that major financial burden.

As much as consumers will react in accordance with their own personal feelings and circumstances and not likely adjust as a result of today’s sale data, retailers, brands and websites likely will, in an attempt to entice shoppers once again with another set of markdowns and deals. It’s a process of promotion that’s been happening since early October.

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