Modest spending through back-to-school headed to holidays

Retail sales gains have moderated near 3.5% growth in the back-to-school third quarter. That’s half a percentage point stronger than a year ago, although brick-and-mortar growth remains much weaker given e-commerce gains.

Furniture and home improvement stores are holding up best and apparel retailers worst in the face of strong e-commerce gains. (See this post, for the big-picture e-commerce impact.)

Tempering the gains are Millennial and Boomer shoppers, whose spending confidence leveled off in August (more here).

Here is more on what the latest retail numbers say:

  • Monthly trend. The three-month trend is looking a little weaker than suggested just last month by the government-reported data. Both June and July were revised slightly lower while August sustained the prior-month trend near 3.5% (at retail channels excluding autos, fuel and restaurants).
  • Quarterly trend. The third-quarter trend suggests a growth pace of about 3.5% for the back-to-school season and headed to the December holidays—which is half a percentage point stronger than the year-ago pace. The relatively weak year-ago results will support somewhat stronger growth this year.
  • Annual trend. 2017 is shaping up to be a below-average growth year across a number of (unadjusted) measures. Restaurant and auto sales have slowed significantly—although they still remain healthier than traditional retail segments (excluding restaurants and autos).
  • E-commerce vs. in store. Weaker year-to-date growth is focused at apparel and department stores, where sales are declining (primarily at department stores). Food, drug and mass retail stores also are weaker compared with 2016. Homegoods stores are the only retail sector outside of e-commerce registering a sales pickup in 2017.

The latest data suggest that the year-to-date retail sales pace is running below the stronger pace forecast for 2017—by half a percentage point in seasonally adjusted terms and shy of a full percentage point in unadjusted terms.

MacroSavvy™ has forecast a 2017 gain of 4.0% in retail sales excluding autos, fuel and restaurants, which would be slightly stronger than 2016.

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