- An HVAC Perspective on Upcoming Construction Markets (Part 2)
- An HVAC Perspective on Upcoming Construction Markets (Part 1)
- Bank of Canada Cuts Rate, ‘Loonie’ Suffers Unflattering Rout
- SOTU’s Three Construction Sidebars
- Twenty major upcoming Oil & Gas and Electric Power construction projects - Canada - January 2015
U.S. Retail Spending Buffeted by Shocks and Uncertainties11/16/2012 by Alex Carrick
U.S. retail spending in October retreated 0.3% month to month in “current” (i.e., not adjusted for inflation) dollars, according to the Census Bureau.
There were two mitigating circumstances that accounted for the decline.
First, Hurricane Sandy took a big bite out of activity levels. Power outages and storm damage shut down a wide range of businesses for at least a couple of days at the tail end of October.
(There was also a slight inverse effect. Some establishments, if they were able to stay open, received a boost in sales from the storm. They supplied generators, tents, lumber, etc. to help deal with the crisis. These gains are more likely to appear in the November retail sales results.)
Second, October was preceded by several strong months. In the latest report, September’s retail sales were revised up to +1.3% month-to-month. The introduction of Apple’s iPhone5 contributed to the surge. August was impressive as well, at +1.0%.
October was bound to be a letdown after September and August.
Year-over-year U.S. retail sales in the latest month were +3.8%. The three-month moving average gain was +4.7% year over year.
Some of the major sub-category movements were: motor vehicle and parts dealers, -1.5% month to month but +5.0% year over year; furniture and home furnishings suppliers, -0.6% month to month but +5.3% year over year; and electronic and appliance vendors, -1.0% month to month and -5.6% year over year. That last number, -5.6%, was partly on account of Asian suppliers engaging in aggressive price wars.
Non-store retailer sales (i.e., Internet shopping and catalogue sales) were -1.8% month to month and +7.2% year over year. Even web surfers in the U.S. Northeast were thrown off their schedules by the vicious weather.
In some ways, it’s surprising U.S. retail sales have performed as well as they have of late. There have been a number of factors working against their resiliency.
American consumers have been making a concerted effort to reduce their debt loads. That alone should restrain spending. As a corollary, there has been an increase in the savings rate.
Prolonged weakness in the labor market – exemplified by the sizable number of long-term unemployed individuals – has impacted incomes and the ability to spend.
Employers have been able to suppress their compensation levels. Unions, aware of the economic circumstances, have been more restrained in their wage demands. They don’t have to look far to see examples of how labor strife can lead to disaster for their members.
Hostess Brands Inc. has just announced it will be ceasing operations and selling off its assets after failing to reach a new agreement with its union. The 82-year old company makes such well-known brands as Wonder Bread and Twinkies. The move will eliminate 33 bakeries and hundreds of distribution and retailing operations. 18,500 workers will be let go.
Many of the long-term unemployed, in order to secure jobs, have been willing to accept the kinds of reduced employment status they wouldn’t have considered before. Or they’ve been prepared to accept greatly lowered pay packages.
The U.S. has been making gains on the employment front. The jobless rate in the latest two months has been below 8.0% after spending 43 months at that level or considerably higher.
But the labor force isn’t entirely out of the woods yet. The initial jobless claims number for the latest week, ending November 10, shot up by 78,000 to reach 439,000.
Again, Hurricane Sandy contributed mightily to workers being laid off in a number of states. Much of this work will be recovered in the months ahead.
Nevertheless, Mr. Obama caught a break in the timing of the data. It came only a few days after his re-election as President.
In both the U.S. and Canada, we’re approaching the critical holiday shopping season. This is when many retailers make the profits that keep them in business throughout the entire year.
In the U.S., the usual kick-off day comes immediately after Thanksgiving. It’s the “Black Friday” of shopping lore (November 23rd this year). Many storeowners open their doors at midnight and shoppers line up to catch the bargains.
Consumer confidence seems to be on a roll. The most recent Thomson Reuters/University of Michigan consumer sentiment index was at a five-year high.
However, there are reasons shoppers may turn conservative as 2012 winds down.
The “fiscal cliff” looms and while it will most likely be averted by some form of compromise, there’s still the question of what the personal tax environment will be in 2013.
Plus Obamacare is here to stay and many employers and employees are up in the air about what their medical-care financial obligations might be.
Working in the opposite direction, rising U.S. house prices are a plus for retail spending. All of the recent measures on U.S. existing home prices indicate a positive turnaround.
Higher home prices provide householders with an elevated sense of their own wealth. An owned-home is usually the largest assert in a family’s balance sheet.
And the significant improvement in U.S. housing starts is another reason to expect more home-related retail sales.
On balance, the U.S. consumer should continue to make a significant contribution to the one economy in all of the world that is most clearly – for now, at least – on a decent recovery path.
Based on latest three-month averages of current dollar adjusted data (and placed in latest month).
Adjustments are for seasonal variation, holiday and trading day differences, but not for price changes.
Chart: Reed Construction Data - CanaData.
Chart: Reed Construction Data - CanaData.