A Merry Retail Season: January 15 – 19

Retail sales ended 2023 on a high note. Here are the five things we learned from U.S. economic data released during the week ending January 19.

Solid holiday retail sales in December. Retail and food services sales jumped 0.6 percent to a seasonally adjusted $709.9 billion. Over the last three months of 2023, the Census Bureau data series was up 3.9 percent over the comparable 2022 months. Falling prices at the pump led to a 1.3 percent decline in gas station sales, while auto dealer and parts store sales increased 1.1 percent. Netting both, core retail sales grew 0.6 percent in December, with October-December activity 4.7 percent ahead of the comparable 2022 months. Sales increased at retailers focused on apparel (+1.5 percent), building materials (+0.4 percent), sporting goods/hobbies (+0.3 percent), and groceries (+0.2 percent). Sales rose 3.0 percent at department stores and 1.5 percent at nonstore retailers. Sales declined at personal/health care stores (-1.5 percent), furniture retailers (-1.0 percent), and electronics/appliance stores (-0.3 percent).

Sales of previously owned homes fell to a 29-year low. The National Association of Realtors reports existing home sales declined 1.0 percent to a seasonally adjusted annualized rate (SAAR) of 3.78 million units. Sales have not been this low since 1995. Sales jumped 7.8 percent in the West, held steady in the Northeast, and declined in the Midwest (-4.3 percent) and South (-2.8 percent). Inventories contracted to a mere 1.00 million homes, the equivalent of a minute 3.2-month supply. The median sales price of $382,600 was up 4.4 percent from a year earlier. The press release characterized the December data as “the bottom before inevitably turning higher in the new year.”   

Housing starts slowed in December. The Census Bureau estimates privately-owned home starts dropped 4.3 percent to a seasonally adjusted annualized rate (SAAR) of 1.460 million units. Even with the drop, starts were 7.6 percent ahead of their year-ago pace. Single-family home starts slumped 8.6 percent, while they improved 7.5 percent for multi-family units. Looking towards the future, the issued building permits grew 1.9 percent during the month and 6.1 percent from a year earlier to an annualized 1.495 million. Single-family and multi-family permits increased 1.7 percent and 1.4 percent, respectively. Completions jumped 8.4 percent during the month to an annualized 1.574 million homes. Homebuilders completed 1.453 million homes in 2023, up 4.5 percent from the prior year.

Rising sentiment and falling inflation expectations in January. The University of Michigan’s Index of Consumer Sentiment surged 9.1 points to a seasonally adjusted 78.8. The index was up 21.4 percent from a year earlier and was at a 2.5-year high. The current conditions index added 10.0 points to 83.3 and the expectations measure rose by 8.5 points to 75.9. The two were up 21.6 percent and 21.2 percent, respectively, from a year earlier. Survey respondents expect prices to grow 2.9 percent over the next year (its lowest point since December 2020), while they expect longer-term inflation to average +2.8 percent. The press release notes, “sentiment is not just 7 percent shy of its historical average since 1978.”

A modest bump in manufacturing production in December. The Federal Reserve estimates manufacturing sector production edged up a seasonally adjusted 0.1 percent for the month and 1.2 percent in 2023. Durable goods output slowed 0.4 percent, while that for nondurables grew 0.6 percent. The former fell despite gains for both automobiles and furniture. Overall industrial production eked out a 0.1 percent increase in December as a 0.9 percent increase in mining output counterbalanced a 1.0 percent drop at utilities. Industrial production was up a modest 1.0 percent for the year.

Other U.S. economic data released over the past week:

• Jobless Claims (Week ending January 13, 2024, First-Time Claims, seasonally adjusted): 187,000, -16,000 vs. the previous week, -13,000 vs. the same week a year earlier). 4-week moving average: 203,250 (-1.3% vs. the same week a year earlier).
• Housing Market Index (January 2024, Index (>50 = More Homebuilders View the Housing Market As “Good” as “Bad,” seasonally adjusted): 44 (December 2023: 37; January 2023: 35).
• Import Prices (December 2023, All Imports, not seasonally adjusted): Unchanged vs. November 2023; -1.6% vs. December 2022. Nonfuel Imports: Unchanged vs. November 2023; -0.8% vs. December 2022.
• Export Prices (December 2023, All Exports, not seasonally adjusted): -0.9% vs. November 2023; -3.2% vs. December 2022. Nonagricultural Exports: -0.9% vs. November 2023; -2.4% vs. December 2022.
• Business Inventories (November 2023, Manufacturers’ and Trade Inventories, seasonally adjusted): $2.549 trillion (-0.1% vs. October 2023; +0.4%. vs. November 2022).
• Treasury International Capital Flows (November 2023, Net Foreign Purchases of U.S. Securities, not seasonally adjusted) +$149.4 billion (October 2023: +$9.2 billion; November 2022: +$140.6 billion).
• Beige Book

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