U.S. retail sales declined for the second consecutive month in November

*U.S. retail sales declined by 1.1% in November, its second consecutive monthly decline with October’s retail sales revised lower to a decline of 0.1% m/m from the prior estimate of an increase of 0.3% (Chart 1). Retail sales are still 3.6% above the pre-pandemic level despite the sharp drop in November because of the strong growth between May and September. We expect economic and labor market activity to decelerate through early Q1, then re-accelerate once this intense stage of the pandemic ends and vaccines become widely distributed.

*Retail sales were broadly weak in November with 10 of the 13 categories declining (Chart 2). The $6.0bn decline in total sales was driven by restaurants and bars (-$2.2bn), motor vehicle and parts dealers (-$1.9bn), and clothing and accessory stores (-$1.4bn). See Table 1. Control retail sales (excludes gasoline stations, food services and drinking places, building materials, and auto sales) which factor directly into GDP, declined by 0.5% m/m and was also revised lower in October to a decline of 0.1% m/m from the prior estimate of an increase of 0.1% (Chart 3). Control sales are on track to increase by 3.0% q/q annualized in Q4, following the robust rebound of 44.4% q/q annualized in Q3.

*The broad-based weakness in November’s retail sales suggests that personal consumption also declined in November following its 0.5% m/m increase in October. Note that consumption includes a broader range of services, so the magnitude of its decline in November will likely be larger than that of retail sales. As of October, consumption was still 1.6% below its February level.

Non-store retail sales (includes online) increased by $0.2bn in November, lifting its share of total retail sales to 16.0% from 15.8% (in February, this share was 13.1%), driven by reduced visits to physical retail locations due to the sizable increases in COVID-19 cases and hospitalizations (Chart 4). Non-store sales will continue to outperform most other retail categories until the pandemic ends.

Sales at restaurants and bars declined by $2.2bn in November, its second consecutively monthly decline, as some state and local governments imposed restrictions on restaurants. As a result, grocery and liquor store sales increased by $1.1bn, making it the best performing category in November (Chart 5). Sales at restaurants and bars are now 18.6% below the pre-pandemic level, while sales at grocery and liquor stores are 10.9% above the pre-pandemic level.

Sales at building materials, garden equipment, and supply dealers continued to increase robustly, by 1.1% m/m to $38.3bn, placing it 14.9% above its pre-pandemic level (Chart 6). Other housing related categories, furniture and home furnishing stores (-1.1% m/m), and electronics and appliance stores (-3.5%), declined in November.

Despite the broad-based weakness in November’s retail sales, eight (out of 13) categories are above pre-pandemic levels (Table 1). However, the gap between the best performers – non-store retail sales (+26.9% above February’s level), sporting goods, hobby, book & music stores (+16.0%), and building materials, garden equipment, supply dealers (+14.9%) - and the worst performers - restaurants and bars (-18.6% below February’s level), clothing and accessory stores (-16.5%), gasoline stations (-15.0%) - is once again widening because of the pandemic intensifying. These trends should reverse next year when conditions begin to normalize.

Table 1: Retail sales trends since February

Sources: Census Bureau and Berenberg Capital Markets

Chart 1:

Chart 2:

Sources: Census Bureau and Berenberg Capital Markets

Chart 3:

Chart 4:

Chart 5:

Chart 6:

Roiana Reid, roiana.reid@berenberg-us.com

Member FINRA & SIPC
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