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Commerce Department Says Retail Sales Tanked in December

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According to the Commerce Department, retail sales were negative in December. This is much bleaker data than the same-store sales comps that came out a week ago. The decline was not what economists had expected. Sales were expected to rise 0.5 percent according to economists surveyed by Marketwatch.

The only silver lining here is that retail trade sales were up 5.9 percent over last year. So this December did mark an improvement over last year's disastrous holiday shopping season. However, a look at business breakout reveals that the types of retailers that shopping center owners rely on had the weakest performance. The best year-over-year seasonally adjusted performers were gasoline stations (+33.6 percent), nonstore retailers (+10.6 percent) and auto and other motor vehicle dealers (+7.6%).

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for December, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $353.0 billion, a decrease of 0.3 percent (±0.5%)* from the previous month, but 5.4 percent (±0.5%) above December 2008. Total sales for the 12 months of 2009 were down 6.2 percent (±0.2%) from 2008. Total sales for the October through December 2009 period were up 1.9 percent (±0.3%) from the same period a year ago. The October to November 2009 percent change was revised from +1.3 percent (±0.5%) to +1.8 percent (±0.2%).

Retail trade sales were down 0.2 percent (±0.5%)* from November 2009, but 5.9 percent (±0.5%) above last year. Gasoline stations sales were up 33.6 percent (±1.5%) from December 2008 and nonstore retailers sales were up 10.3 percent (±1.7%) from last year.

But why were the numbers so far off? Economist Dean Baker had a post up briefly here that seems to be gone now that said economists don't account for a bias in same-store sales metrics when thinking about retail sales. Moreover, he points out that the December numbers showed a weak result in the general merchandise sector, which isn't a great sign for retail real estate.

He explains:

The big culprit in this drop was the general merchandise sector (department stores and Wal-Mart), which had a 0.8 percent drop. The likely reason that many economists missed this drop is that they continue to ignore the same store sale bias. There are many fewer stores this year than last. This means that even if overall sales were constant, sales in same stores would rise. This bias will gradually disappear as we move forward and the comparison month in the previous year looks worse, but for now it is still substantial.

Calculated Risk's monthly take is here.

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Retail Sales December

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Elaine Misonzhnik

Senior associate editor Elaine Misonzhnik has been writing for National Real Estate Investor since June 2006 and has covered commercial real estate for more than 12 years. She first became...
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