We saw a bit of a shock last week when retail numbers from December came out shy of market consensus by almost 1% at -1.95% month over month. While the downward trend may be not what we like to see, when we look at it from a perspective of the previous economic cycle we are still making good progress. From the cycle high in the Great Recession (from 2007 to 2009), it took 41 months for retail sales to go from peak to peak (see the chart below). We would not be surprised by another difficult retail showing for January as the lockdowns are still in force throughout much of the country. However, this trend will most likely abate and steady itself as the vaccine rolls out and the weather warms. We will also see if any new stimulus will be forthcoming as Congress reconvenes this week.
We saw people move into a new sense of normal last summer and spending was up overall, albeit in a much different pattern than before. Some surprises came in the form of where people spent their money. For instance, according to business software service provider Womply, the average increase in spending at pet stores across the nation was +21% in 2020. While this seems excessive, we can look back now and infer that when people spend more time with their pets due to lockdowns, spending on pets should increase. Though we are not sure that this was sussed out by many people beforehand or if another lockdown would produce the same spending patterns.
Not all of the data coming out in the near future will be good, as was evidenced by the jobs reports that came in on Thursday showing an unexpected increase of 165,000 new jobless claims above expectations, for a total of 965,000 new claims of unemployment. While this is a difficult number to swallow, we have to remember that we are still at highly elevated unemployment coupled with lockdowns across much of the nation. It is not unreasonable to assume that unemployment claims will continue to be high. We don’t want to see the number breakout back above 1 million per week, but data like this helps us remember that we are still in the middle of a crisis. The good news is that we are miles away from the weeks of 3 million filers for unemployment in March 2020.
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