Something has broken in the steady upward trend of US consumer demand, which has persisted over the past year.
Retail Sales Data
Retail sales collapsed by 0.8% month-over-month (m/m), and it should be noted here that December and January are periods with a high level of statistical artifacts - failure to account for seasonal coefficients arising from the peculiarities of survey methodology in this period.
Comparison with Previous Years
For instance, the data for December underwent significant downward revisions of 0.5%, and November saw a decrease of 0.3%. However, the estimated baseline for January of the previous year was overstated by 0.5%.
It turns out that the current January data is 1.3% below December's and just 0.65% above last January's - all at face value. Year-on-year growth is the weakest since late 2020.
- When US demand was robust, January data was strongly positive: 3.8% m/m in 2023, 1.4% m/m in 2022, and 3.5% m/m in 2021.
- Larger declines in January than in 2024 were seen in 2014, down 0.9 percent, and in 2005, down 1 percent.
- Comparing January to October of the previous year (holiday season): 0.4% decline in 2024 vs 1.1% growth in 2023, +2% in 2022, +3.6% in 2021.
- Larger declines were seen in 2019 - 1.1%, in 2015 - 0.9%, and recessionary 2009 - 4.6%. There was a localized slowdown in demand in 2019 and 2015 and a clear crisis in 2009.
- Retail sales account for a third of consumer demand, 23% of GDP, and more than 30% of national fixed investment - a significant macroeconomic indicator.
Conclusion
The decline in retail sales from November to January inclusive is a serious signal of domestic demand problems.
Weak data in February - March will almost certainly signal an entry into recession and negate all growth in Q4 2023.
Retail sales have always been the first to signal system failures.