For the month of December, the U.S. Census Bureau said retail saw $437.83 billion in sales, a 5.6 percent increase over a year earlier, boosting the industry’s collective top line by about $23 billion. For the full year, retail sales came in at $5.07 trillion, an increase of 4.4 percent over the previous year.
Apparel and accessories specialty retailers saw a boost in sales as well, with December sales growing 2.4 percent to $22.06 billion and sales for the full year expanding 1.1 percent to $261.21 billion.
But the highest rate of growth came from online, or nonstore retailers, coinciding with shopping trends over the past couple of years. The sector increased sales 12.6 percent in December, to $55.56 billion, and 10.4 percent over the entire year to $624.96 billion.
The season wasn’t so cheery for everyone, though. Sales at department stores ticked up just 0.5 percent to $12.61 billion in December. And for the year, the sector landed in negative territory, with sales falling 1.8 percent to $151.93 billion.
Chris Christopher, a director with research firm IHS Markit, said the relatively weak department store performance is “most likely due to holiday shoppers shifting away from bricks and onto the clicks.”
Regardless of how people shopped this holiday season, they shopped more than they have since before the recession, according to Craig Johnson of consulting and research firm Customer Growth Partners.
“Unleashing a decade’s worth of pent-up demand, American households boosted their holiday spending at a rate not seen since pre-recession 2005 — signaling the start of a sustained consumer boom,” Johnson said. “Combined with accelerating disposable income growth and the ‘wealth effect,’ the broad-based nature of the rebound shows that all the ingredients are in place for a sustained retail recover well into the New Year and perhaps beyond.”
The “wealth effect” is an economic notion that spending increases when a person’s “perceived wealth,” generally based on increased value of assets like a home or stocks, is thought to be higher.
The National Retail Federation said the season’s sales came in well above its expectations of 4 percent growth at the high end, and cited “growing wages, stringer employment and higher confidence” among consumers. The average hourly wage in the U.S. did reach a new high of $22.23 after starting the year at $21.83, according to government data, but wages have been very consistently trending up almost on a monthly basis since the Sixties.
“Whether they shopped in-store, online or on their phones, consumers were in the mood to spend, and retailers were there to offer them good value for their money, NRF president Matthew Shay said. “With this as a starting point and tax cuts putting more money into consumers’ pockets, we are confident that retailers will have a very good year ahead.”
NRF’s chief economist Jack Kleinhenz noted this holiday season “Market conditions were right, retailers were doing what they know how to do and it all worked.”
“The willingness to spend and growing purchasing power seen during the holidays will be key drivers of the 2018 economy,” Kleinhenz said.
Johnson’s CGP looked at the full holiday spending period, starting in November and going through December, and found that retail sales grew 5.7 percent to $671 billion, the highest level since the same period in 2005, or two years before the National Bureau of Economic Research says the recession began in December 2007.
The firm said “retail growth was widespread across all major merchandise sectors, across formats (big-box, specialty, etc.) both online and in-store and across the income spectrum.”
While CGP found sales in apparel retail rose 2.7 percent during the period, that sector was far outpaced by home improvement retail, which saw sales rise 8.1 percent and home furnishings, which grew 7.5 percent. Online sales also again outpaced physical retail with sales up 11.5 percent, the firm found.
“After years in hibernation, consumers — accounting for 70 percent of gross domestic product — are finally flexing their spending muscles,” Johnson added. “In short, the coming consumer boom has already arrived.”
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