The January sales gains are a bit better than what we have seen over the previous four months, but they still continue a trend of softer sales growth since August. As we have remarked in previous posts, a good bit of this softness can be linked to sharply reduced imports of consumer goods from China over that same time span. That is, just as retail sales have been sluggish since August, total imports have plunged since August, and those general declines show up prominently in imports of consumer goods and in imports from China.
We can’t directly prove any link between these phenomena. However, when retail sales of merchandise soften at exactly the same time that imports of merchandise from a major supplier plunge, one has to think that a link is likely.
A previous caution we had in pushing this story was that we had not heard retailers complaining of a shortage of merchandise holding back demand. However, another piece of the puzzle was possibly divulged within today’s sales report. That is, a good bit of the softness in total sales now appears due to a sudden stall in online sales of merchandise ... also since August.
Through August, sales at "nonstore" (online) retailers had been rising at a 16% annualized rate. In the five months since then, sales at nonstore retailers have fallen at a -2.5% annualized rate. Also, online retailers tend to be less high profile than traditional, brick-and-mortar retailers, and so they would seem to be less likely to comment on a shortage of merchandise.
Admittedly, this is all speculative. However, when one sees sudden swings in the data with no fundamental explanation, it is hard not to look at factors such as we have described. Consumer incomes are growing nicely. Consumer spending on services continues to grow steadily. It is solely in consumer spending on merchandise where the recent softness has shown up, and there appears to be an import-related rationale for this.
In the foreign trade data for December, we began to see some rebound in imports. Our guess is that this will begin to show up in the retail sales numbers next month. Certainly, we do not expect the sluggishness in retail sales to continue, any more than did a similar slowing that occurred exactly one year ago.