The monthly Retail Report, which was delayed due to the shutdown, is finally out, and the news isn’t good. The U.S. Census Bureau’s report dropped early morning on Valentine’s Day and evoked no warm, heart-shaped feelings. Quite the opposite, the report revealed a 1.2% decline for the month of December. This is a downturn the likes of which has not been seen since September 2009, while we were still recovering from the financial crisis.
To make matters worse, analysts were predicting a neutral report, rather than a negative one, previously anticipating growth of 0%.
There was no good reason for retail sales to sink during one of the busiest shopping seasons of the year, and the bears see it as an indication of a potential shift in market momentum, with good reason. Save for a minor increase in sales for auto dealerships and home centers, there was a drop in sales across the board. Gas Stations was hit the hardest, with sales plummeting 5.1% in reaction to the slump in gas prices.
The biggest shock, however, came from internet sales, which experienced a 3.9% drop. That’s a figure the likes of which hasn’t been seen since November 2008 when we were in the midst of the recent recession.
eBay Inc (NASDAQ:EBAY) and Amazon.com Inc (NASDAQ:AMZN) dodged the brunt of it and witnessed the gains you’d expect to see during Christmas, but all other internet based entities suffered.
The sad, but unsurprising news came in the form of reduced sales at the larger brick and mortar retailers like Nordstrom (NYSE:JWN), Macy’s Inc (NYSE:M) and Kohls Corp (NYSE:KSS). Their December was incredibly disappointing. They weren’t alone either. Bars, grocers, restaurants, home furnishers, pharmacies, and hobby outlets also felt the pain in this retail report.
Now I’m not normally one to fuss over retail sales data, but I fear it may be a sign of things to come in 2019. Market analysts and economists predict the U.S. GDP declined 2.7% at the close of 2018, but if the Retail Report is any indication, those numbers will likely be far worse, with a growth contraction far larger than originally anticipated.
Investors quickly realized that possibility and markets like the Dow plummeted, sinking 200 points mere minutes after the opening bell.
A Chief Economist from Pantheon MacroEconomics, Ian Shepherdson, came forward with an alternative theory when consulted by MarketWatch:
These data are so wild that we have to expect hefty upward revisions, but if they stand, they are very unlikely to be representative of the trend over the next few months. The consumer is no longer enjoying tax cuts or falling gas prices, but that’s no reason to expect a rollover.
In light of this news, any hope of a Bullish post-Christmas rally has been obliterated.