2008 Holiday Retail Sales Down 2.8%

Retail industry sales for December (which exclude automobiles, gas stations, and restaurants) declined 2.2 percent unadjusted over last year and decreased 1.4 percent seasonally adjusted from November, according to the National Retail Federation.

“A deep recession, severe winter weather, and five fewer shopping days combined to create the most challenging sales environment in years for the nation’s retailers, NRF said in a statement Wednesday.

November sales were revised down to a 3.4 percent decline unadjusted year-over-year from the original reported 2.2 percent.

As a result, initial 2008 holiday sales, which combine November and December sales, declined 2.8 percent to $447.5 billion, weaker than NRF’s projected a 2.2 percent holiday increase. Holiday sales in 2007 were $460.2 billion. This represents first decline in holiday sales since NRF started forecasting and tracking the numbers in 1995.

“The current economic crisis proved to be more challenging than any had anticipated,” said NRF Chief Economist Rosalind Wells. “Consumers showed they were more than willing to wait out retailers this year causing increased pressure on prices.”

December retail sales released today by the U.S. Commerce Department show total retail sales (which include non-general merchandise categories such as autos, gasoline stations and restaurants) decreased 2.7 percent seasonally adjusted from last month and dropped 7.9 percent unadjusted year-over-year. 

There were very few seasonal bright spots in December. Among them were health and personal care stores, where unadjusted sales grew 7.6 percent year-over-year and 0.4 percent seasonally adjusted from November. Sporting goods, hobby, book, and music stores were up 0.7 percent unadjusted from a year ago and down 0.4 percent from seasonally adjusted month-to-month.

Weakness was seen by clothing and clothing accessories stores (down 9.4% seasonally adjusted year-over-year and 2.5% month-to-month seasonally unadjusted), furniture and home furnishings stores (down 11.9% seasonally adjusted year-over-year and 1.8% month-to-month seasonally unadjusted) and electronics and appliance stores (down 3.2% seasonally adjusted year-over-year and 1% month-to-month seasonally unadjusted).

Commenting on the commerce department’s figures, Brian Bethune, IHS Global Insight chief U.S. Financial Economist, said: “The December report is another stark reminder of the extensive damage to consumer confidence and spending from the deepening recession. … Real consumer spending shrunk by an estimated 3.8 percent in the fourth quarter, the same rate of decline as the third. This is the largest back-to-back decline in real spending since the first half of the 1980s.”

He continued, “Household incomes have been hammered down by very steep reductions in payroll employment and hours worked in the fourth quarter. Adding insult to injury, net household worth declined for the fifth consecutive quarter. Household net worth declined by close to $8 trillion dollars in the short space of five quarters—that is roughly double the $4.2 trillion decline in net worth that we saw in the 2001 recession cycle—and this huge destruction of net worth took place in less than half the time.

Bethune, also saw positive signs in early 2009, including the drop in mortgage rates to below 5 percent and the stabilization of General Motor’s financial lending arm, GMAC.

“There is a trickle of oxygen flowing back into the credit markets, which should at least provide a better set of initial conditions for the upcoming massive Obama fiscal stimulus program, likely to be passed in February 2009,” he said.