It doesn't matter how much the data diverges from the forecast because forecasts can be highly manipulative. Let's get straight to the actual data!
Long-Term Retail Sales Trends
Retail sales grew by only 0.05% month-over-month (m/m) in nominal terms, although the July data was revised upward by 0.1%. For the year, nominal growth was just 2.1%, and inflation-adjusted growth was 2.7% year-over-year (y/y) according to the Bureau of Labor Statistics (BLS), based on the goods deflator (indicating deflation).
The long-term trend growth rate for retail sales in real terms was 4.3% from 2010 to 2019. However, post-trend growth has slowed to 3.6%, despite aggressive growth in 2020 and 2021 (indicating stagnation starting in mid-2021). Current potential growth is now half the long-term trend.
What’s important to note? The annual result was largely driven by a relatively strong performance in late 2023. Comparing August 2024 to December 2023 on an inflation-adjusted basis, retail sales grew by just 0.7%.
Historical Growth Comparisons
On a comparable basis (August of the reporting year to December of the previous year), average growth between 2010 and 2019 was 2.7%, adjusted for inflation, similar to the average growth from 1993 to 2007. The rate increased to 3.8% from 2020 to 2023.
Since 1993, lower growth rates than in 2024 have only been seen at the start of recessions in 2000 and 2007 - 2008. The result for the first eight months of 2024 is almost four times worse than the historical long-term trend on a comparable basis, even taking into account deflation in the commodity group.
It would be unreasonable to expect a different outcome against a backdrop of slowing income growth, depleted savings, and the exhaustion of the sustainability buffer from 2020 - 2021.
Conclusion
In conclusion, despite a slight upward revision and relatively strong performance at the end of 2023, retail sales growth in 2024 is significantly weaker than long-term trends. Nominal and inflation-adjusted growth rates show marked stagnation, with current growth rates well below historical averages, particularly when compared to pre-2020. This decline reflects broader economic factors such as slowing income growth, depleting savings, and depleting buffer stocks in 2020 - 2021, making it clear that the retail sector is struggling to regain momentum in the current economic environment.