MNI REALITY CHECK: US Nov Sales To Fall; First Since April

U.S. retail sales likely fell in November for the first time since bottoming out in April, figures due Wednesday should show, as surging Covid-19 infections trigger renewed business restrictions and dampen consumer confidence, industry experts told MNI, although noting holiday spending may have helped dull the impact.

Still-strong disposable income and savings rates in November mean there was an ability to spend through the month, said Jack Kleinhenz, chief economist at the National Retail Federation. But surging virus cases, increased layoffs and the absence of a new federal stimulus package could have influenced consumers to rein in spending.

"The question is was there a willingness to spend?," he said.

Black Friday and Saturday sales were likely lower than last year because many brick-and-mortar stores were closed over Thanksgiving, he said, although the month wasn't all bad. "Sales were doing pretty well in the first half of November so my sense is we'll come out of the month okay."

Holiday spending kicked off earlier than usual this year, Kleinhenz said, with sales campaigns from major retailers encouraging consumers shopping in-person to "get out and buy early" to avoid large crowds. That could make November's numbers look a little better.

"There's a high likelihood that we did pull some spending forward" into October, he said.

Kleinhenz said the Thanksgiving holiday in November should have put upward pressure on grocery store sales, as many Americans likely "fixed a holiday dinner themselves" rather than went out to eat.

"Don't minimize the importance of food and groceries," he said, noting that the sector accounts for roughly 20% of monthly spending excluding motor vehicles, gasoline, and restaurants. That should help boost headline retail sales he said, likely offsetting at least some of the weakness from restaurant sales.

Still Worried

"I don't want to sound overly optimistic, I am concerned," he said, and spiking infections and hospitalizations are "putting a long shadow on spending."

Waning confidence should weigh heavily on retail sales not only through November, but through the rest of the year, particularly discretionary spending on items like apparel, said Gary Raines, chief economist at the Footwear Distributors and Retailers of America.

Raines said recent shutdowns tied to rising Covid-19 infections have thus far been limited to service-sector businesses like bars and restaurants, but he fears shopping centers and "non-essential" retailers could be next if the nation's outbreak worsens.

Autos

Challenges in the broader economy are putting downward pressure on vehicle sales, said Zo Rahim, manager of economic and industry insights at Cox Automotive, the Atlanta-based parent company of online vehicle retailers Kelley Blue Book and Autotrader.

New vehicle sales in November reached a seasonally adjusted annual rate of 15.6 million, softening from October's 16.2 million pace, according to data from Cox. Year-to-date sales are down 17%, he said.

"We're likely to end the year down," he said. "You'd have to have one of the best months ever to get even flat at this point in the market."

Rahim said many potential new vehicle buyers are being priced out of the market as increasing demand and inventory constraints drive prices higher he said, driving more buyers to the much-larger used vehicle market.

"Because of its size, because of the products and type of buyers, the used vehicle market during an economic crisis declines less than the new vehicle market and rebounds quicker," he said, noting that the used vehicle market is down only 10% year-to-date.

Excluding vehicle sales, retail sales are expected to increase 0.1% from 0.2% in October.

The 0.3% month-over-month decline for overall retail sales forecast by Bloomberg would be the first decrease since April, highlighting new weakness across the sector.