The economy is creating plenty of jobs, incomes are rising and gasoline is the cheapest in years. But you wouldn’t know it from the amount of sales that retailers are ringing up.
Retail sales are expected to fall in December — mainly because of fewer purchases of new cars and trucks — and end the year on a weak note, according to the MarketWatch forecast. Sales have softened sharply since last January, even if falling gasoline prices are taken into account.
Mediocre retail sales is hard to square with other measures such as employment that show the U.S. economy growing at a moderate pace. Last Friday the government said the U.S. created 292,000 new jobs in December to cap the fifth straight year in which employment gains topped 2 million.
Falling gasoline prices can’t explain away the lackluster performance of retailers, either.
Sales minus autos and gasoline in the 12 months ended in November slowed to a 3.4% clip from a three-year high of 5.6% last January. By comparison, sales in that category rose by an average of nearly 5% a year from 2002 to 2007.
Many economists as well as executives within the industry contend the government’s retail report understates sales. They say it doesn’t fully reflect sweeping changes in how and where Americans shop.
Economist John Canally, an investment strategist at LPL Financial, said his daughters mostly shop online. They also rely on gift cards to pay for their purchases.
“I don’t think the retail report accurately captures online sales,” he said. “The report was set up when everyone went to their local mall. People don’t shop like that anymore.”
To be sure, many retailers are struggling. The large upscale department chain Macy’s M, -2.71% , for instance, plans to cut 4,500 jobs after a dismal fourth quarter. Unseasonably warm weather and the intensifying shift to online shopping hurt Macy’s and other traditional retailers late in the year.
Yet there’s also other evidence that suggests overall retail sales were pretty good.
The giant credit-card company MasterCard said retail purchases excluding gas and autos jumped 7.9% in the 2015 holiday season, up from 5.5% in the same period in 2014.
Some analysts think a stronger holiday shopping season could lead to higher retail sales in December than Wall Street expects, particularly if autos are stripped out. Auto sales were lower than expected last month even though they set a new annual record in 2015.
“The forecasts called good but not great growth, but some reports suggest a big surge toward the end of the holiday season,” said Dan North, chief economist at risk-management firm Euler Hermes.
Before the retail report is released on Friday, pay attention to the first big batch of corporate earnings reports and what top U.S. executives say about the economy. That could offer a clue on whether the big gains in hiring at the end of 2015 spill over into the new year.
Even though the U.S. is more than six years into a recovery, most executives still aren’t talking up the economy, though.
“They all say the same thing: things are better but they are not nearly as good as they were before the recession,” North said.