Today the US Commerce Department reported retail sales rose 0.6% in December from a month earlier. Though helped by strong car sales and higher gas prices, sales in other categories were flat on the month and underscored how bad the holiday shopping season was for many retailers. A key takeaway is that the reported Trump bump in investor sentiment is not translating into consumer spending to date.
The truth is that an aging, indebted population, struggling with low savings’ yields, has less appetite and ability to spend. Blind confidence won’t help. What’s needed are wage gains, higher yields, lower expenses and less household debt. Not things the new government can manufacture at all, let alone quickly. See Consumers Confident but not enough to spend:
For investors, one message from the sentiment and sales reports is that whatever good vibes people are feeling since the election, they may not be enough to meaningfully alter spending habits. The cautious spending habits Americans adopted in the financial crisis aren’t going to be unlearned based on who occupies the White House. Rather, wages and job growth will set the tone for how much people buy. How businesses behave will play a big role in how consumers spend during Mr. Trump’s administration.
For traditional retailers, the message is even starker. Consider: The unemployment rate is 4.7%, and the economy has improved to the point that the Federal Reserve expects to quicken its pace of rate increases. If stores can’t do well in this environment, what happens when the economy, as it always does, slows down?
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